Gold fell for a third straight session on Thursday, hitting a 10-month low as unprecedented monetary stimulus from the Bank of Japan and hopes for another European Central Bank rate cut failed to stem heavy selling of bullion by funds.
Palladium dropped around 3 percent, dragged down by a commodities selloff led by crude oil as a four-month high in U.S. initial jobless claims dented demand hopes.
Data showed investors pulled more money out of gold exchange-traded funds. Bullion is now testing long-term chart support around $1,525 an ounce, and analysts warned of further losses if it breaks below that mark.
"We have a lot of liquidation of the gold ETFs and the short position on the Comex for gold remains very high, so a lot of the macro hedge fund selling has put pressure on gold," said Howard Wen, metals analyst at HSBC.
Spot gold earlier fell as low as $1,539.74 an ounce, its weakest point since May 30. It was last down 0.2 percent at $1,554.60 by 3:30 p.m. EDT.
U.S. Comex gold for June delivery settled down $1.10 at $1,552.40, with volume about 5 percent below its 30-day average, preliminary Reuters data showed.
The gold market largely shrugged off news that the BOJ had promised to inject about $1.4 trillion into the Japanese economy in less than two years, and a pledge by the ECB that it was "ready to act" if necessary.
Investors will look toward Friday's U.S. employment data for more signals on the strength of that economy. A strong report could cause gold to fall further, analysts said, because it might make it easier for the U.S. Federal Reserve to end stimulus measures that have made some investors leery of possible inflation in the world's biggest economy.
Analysts expect Friday's report to show American employers hired at a moderate pace in March, suggesting the economy was gathering momentum.
"If the nonfarm payroll turns out to be a very strong number, there might be room for gold to fall," Wen said.
ETF HOLDINGS DOWN, GFMS BEARISH
On Wednesday, there was further liquidation of gold-backed ETFs, with holdings of the world's largest, SPDR Gold Trust , declining another 2.71 tonnes after the previous session's 8.1-tonne outflow.
Bullion holdings at the world's major gold ETFs fell to their lowest since August 2012. Their drop this week also marked one of the heaviest declines since gold ETFs posted a record monthly outflow in February. (http://link.reuters.com/wah27t)
Metals consultancy Thomson Reuters GFMS said in a report that gold looks likely to enter a bear market cycle in 2014 after more than a decade of gains. The report added to the downward pressure on gold.
Among other precious metals, silver tumbled to its lowest level since July 24 at $26.62 an ounce. It was last down 0.1 percent at $26.89.
Platinum dropped to its lowest since late August at $1,504.50. It was later at $1,522.50, down 0.6 percent, while palladium was down 3.1 percent at $726.50, having hit a one-month low of $720.22.
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