LONDON (Oct 15): Gold prices dropped back towards $1,220 an ounce on Wednesday as the dollar firmed up and oil prices continued to slide, but concerns over global growth prevented a deeper fall.
Gold rebounded last week after hitting its lowest since mid-2013 but has struggled to gain traction as the dollar recovered lost ground. The metal's recovery stalled at $1,237.90 an ounce on Tuesday, a four-week high, before going into reverse.
Spot gold was down 0.7 percent at $1,223.40 an ounce at 0943 GMT, while U.S. gold futures for December delivery were down $10.40 an ounce at $1,223.90.
Gold has struggled for direction at a time of rising concerns over the health of the global economy, which has hurt stock markets. Economic data from Europe has remained weak and while a worse-than-expected inflation reading from China has added to the gloom.
"Gold is at the mercy of other markets," Macquarie analyst Matthew Turner said. "There are two views here: that the current slowdown is temporary, or that this is another big downturn, and that the central banks are powerless to stop it."
"As the markets swing between those two views, you can get big moves in every market. It would be a brave person to say that gold can consolidate."
The dollar index firmed on Wednesday, touching a one-week high, as the euro came under pressure as worries over a deteriorating euro zone economic outlook, fed by another credit rating blow for France, dominated the market.
Gold, which is priced in dollars, tends to lose ground as the U.S. unit strengthens.
Global equities weakened, boosting gold's appeal as an alternative investment, while German Bund yields fell to record lows.
Analysts will be watching U.S. retail sales and PPI data at 1230 GMT for further clues on the economic outlook.
Meanwhile, gold took some support from physical markets.
Gold imports in India, the world's second-biggest consumer of the metal, nearly doubled in September from August to $3.75 billion, ahead of the country's wedding and festival season.
In top buyer China, physical trading activity remained strong as seen on the Shanghai Gold Exchange, with premiums holding at about $4 an ounce.
Among other precious metals, silver was down 2 percent at $17.08 an ounce.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, rose to its highest in five years on Wednesday at 71.7, as silver underperformed.
Bank of America Merrill Lynch cut its silver price forecast for next year by 11.5 percent on Wednesday to $18.88 an ounce.
"Silver has had structurally weaker fundamentals than gold, given a steady decline in demand from industrial buyers like the photography industry," it said in a note.
Spot platinum was down 1.3 percent at $1,241.10 an ounce, while spot palladium was down 1.7 percent at $774.60 an ounce.
Aquarius Platinum's planned sale of stakes in a small mine and project to a Chinese consortium for $37 million had been terminated after it failed to get South African regulatory approval, the mid-tier producer said on Wednesday.