Gold futures on the COMEX division of the New York Mercantile Exchange settled sharply lower on Wednesday due to a combination of factors including technical selling, deflationary concerns and a strong U.S. dollar.
The most active gold contract for December delivery fell 25.8 dollars, or 1.48 percent, to settle at 1,716.5 dollars per ounce.
Gold fell by as much as 36.80 U.S. dollars to touch a low of 1, 705.5 dollars per ounce during the session, as an initial selling blast on Wednesday morning simply caused more liquidation selling to occur. Some analysts blamed it on speculative players in the market.
But according to some other analysts, concerns over deflation may have been the culprit. Poor preliminary results from the U.S. "fiscal cliff" discussions in Washington were sending a wave of deflation fears into the global market system.
The "fiscal cliff" refers to hundreds of billions of dollars in tax increases and spending cuts that will kick in from next January unless U.S. politicians reach an agreement to avert the situation.
The ICE dollar index, which measures the greenback against a basket of six rivalry currencies, traded as high as 80.586, up from around 80.360 late Tuesday in the North America market. Strength in the greenback weighs on the prices of dollar- denominated commodities such as gold.
Silver for December delivery fell 29.7 cents, or 0.87 percent, to close at 33.684 dollars per ounce.