Gold fell almost 2 percent on Tuesday to its lowest price since August, hit by heavy technical selling and growing hopes that US legislators are closer to reaching a deal that would avert a fiscal crisis next month. Bullion posted its biggest one-day drop since November 2. Analysts said that gold is at a turning point held by technical support at its 200-day moving average and a multi-year rising trendline near $1,660 an ounce.

Spot gold was down 1.9 percent at $1,666.90 an ounce by 2:02 pm EST (2002 GMT). Earlier in the session, bullion hit $1,661.01, a 3-1/2 month low for the weakest price since August 31. However, further losses appeared to be limited for now as it rebounded off its 200-day moving average.

On charts, Tuesday's drop sent spot gold's relative strength index (RSI) to 33, near an area below 30 which is traditionally seen as oversold territory. US COMEX gold futures settled down $27.50 at $1,670.70, with volume in line to near its 30-day average, preliminary Reuters data showed. Silver dropped 2.4 percent to $31.49 an ounce. Among platinum group metals, platinum was down 0.7 percent at $1,590.75 an ounce, while palladium fell 1.5 percent to $686 an ounce.

Copyright Reuters, 2012