Gold fell 1 percent on Thursday as fears the Federal Reserve might withdraw its economic stimulus if the job market improved dramatically prompted funds to reduce their bullish bets. The metal fell below $1,700 on Thursday for the first time this week on economic worries about the US "fiscal cliff," overshadowing its safe-haven appeal. Liquidation by large institutional investors in gold futures on fears of tax hikes in the new year also pressured prices, traders said. Silver dropped 3 percent for its biggest one-day decline in a month.

Spot gold was down 1 percent at $1,694.21 an ounce by 3:09 p.m. EST (2009 GMT) after falling to a one-week low of $1,688.94 earlier. US COMEX gold futures for February delivery settled down $21.10 at $1,696.80, with volume about 15 percent below its 30-day average, preliminary Reuters data showed. Among platinum group metals, platinum fell 1.2 percent to $1,613 an ounce, while palladium eased 0.6 percent to $688.50 an ounce.

Copyright Reuters, 2012