NEW YORK Gold fell more than 1 percent on Thursday, hit by worries of an economic slowdown after a U.S. Supreme Court ruling upheld a landmark healthcare law and by fading hopes that a European Union summit will resolve that region's debt crisis.
Bullion investors were frustrated as it is unlikely that additional stimulus will come out of the summit beginning Thursday in Brussels, as European finance officials were working on urgent measures to ease market pressure on Spain and Italy, which are too big to bail out.
Earlier in the session, gold extended losses as crude oil and U.S. equities tumbled after the Supreme Court upheld President Barack Obama's healthcare law, which assesses a financial penalty to individuals who do not obtain health insurance.
"Individuals are perceived to have less to spend on other goods and services, and companies are less willing to take on additional projects, so you see industrial metals as well as gold and silver sell off ," said Phillip Streible, senior commodities broker at futures brokerage R.J. O'Brien.
The metal has for the most part of this year moved in tandem with riskier assets. In previous years, investors often flocked to gold as a safe haven, driving its price higher in response to economic fears.
Spot gold was down 1.4 percent at $1,553.10 an ounce by 3:16 p.m. EDT (1916 GMT), having earlier hit a four-week low at $1,547.39.
U.S. gold futures for August delivery settled down $28 at $1,550.40.
Turnover has been light recently despite higher price volatility, with trading volume about 30 percent below its 30-day average, preliminary Reuters data showed.
Gold could drift lower in the near term as the market lacked a clear direction because it is unlikely to see immediate improvement or deterioration in the euro zone crisis, said James Steel, chief commodity analyst at HSBC.
A technical indicator showed that bullion's recent weakness might have been exaggerated. Including Thursday's decline, the metal lost five percent in the last seven sessions on deflation fears.
The relative strength index, or RSI, is currently at around 37, the weakest level since late May. A market is typically considered oversold when it falls below 30.
After a sizzling 11-year bull run, bullion is heading for a 7 percent loss for the second quarter, its largest quarterly fall in eight years. It is almost flat year-to-date.
PHYSICAL DEMAND LAGS
The physical market was deserted ahead of the EU summit. Weak rupees have pressured bullion demand from India, the world's largest consumer of the precious metal. <GOL/AS>
Japan's exports of gold plunged to a 15-month low in May to 2.79 tonnes, down 67 percent from a year ago.
Among other precious metals, silver was down 2.2 percent at $26.33 an ounce, while spot platinum fell 1.6 percent to $1,381.25 an ounce. Spot palladium dropped 2.2 percent to $559.88 an ounce.
Palladium earlier fell to its lowest level since October 2011 at $556, pressured by losses in industrial metals and concerns the weak economy would depress demand for the autocatalyst metal.
(Additional reporting by Jan Harvey in London; Editing by Bob Burgdorfer and Jim Marshall)