Gold fell more than 1 percent on Tuesday, underperforming equities and other commodities, as heavy fund liquidation and options-related selling sent bullion prices below a key technical support. The metal hit its lowest price in nearly a month after it broke below its 100-day moving average at $1,698 an ounce, the level gold had held since mid-August. Economic uncertainty related to US budget talks and bouts of heavy selling after last week's option expirations also pressured bullion, traders said.

"You cannot attribute this kind of volatility to any sudden, new fundamentals. There are obviously some large fund-, algorithmic-type players moving the market around," said Bill O'Neill, partner of commodities investment firm LOGIC Advisors. Open interest, a gauge of market activity, has shrunk 10 percent since it hit a 14-month high of near 500,000 lots on November 23. The market has now fallen in five out of the last seven sessions.

Dealers say confidence in gold has been eroded by memories of last December's 10 percent price slide and disappointment over a failure to break $1,800 an ounce on the heels of another round of bullion-friendly assets buyback in September. Spot gold fell as low as $1,690.64 an ounce and was down 1 percent at $1,697.45 by 12:01 pm EST (1701 GMT).

Most-active US COMEX futures contract for February delivery was down $22.40 at $1,697.20, with trading volume on track to finish in line with its 30-day average, preliminary Reuters data showed.

Spot silver dropped 2 percent to $32.94. Gold investors are now focusing on the outlook for US non-farm payrolls data on Friday, due to the link between job creation and monetary policy. A dearth of new jobs could mean that the current ultra-loose monetary policy will persist. Platinum was down 1 percent at $1,583.99 an ounce, while palladium, which has risen for the past five weeks, fell 0.9 percent to $680.22.

Copyright Business Recorder, 2012