NEW YORK Gold fell for a fourth straight day on Tuesday, putting the metal on track for its first monthly drop since August, as selling in gold exchange traded funds (ETF) further undermined investor demand for bullion.
Analysts, however, expect gold's 10-year bull run to remain intact due to lingering economic uncertainty, a view confirmed by a comprehensive Reuters poll that called for an average price of $1,450 an ounce in 2011.
Gold, whose safe haven play has diminished of late, fell in tandem with other industrial commodities, with U.S. crude oil falling 1.5 percent and copper dropping to its lowest since late December. The Reuters-Jefferies CRB index .CRB headed for its sharpest loss in three weeks.
Barclays Capital analysts cited an outflow in the holdings of gold exchange traded products for its price weakness.
Investor sentiment toward gold has soured in the last few sessions, reflected in the largest one-day outflow in three months from the world's biggest gold ETF.
Holdings in the SPDR Gold Trust fell 10.926 tonnes to 1,260.843 tonnes on Jan 24, its largest one-day outflow in three months, after rising more than 20 tonnes in the previous session. It is down about 20 tonnes in January.
Spot gold fell 0.2 percent to $1,332.04 an ounce at 1:09 p.m. EST (1809 GMT), having earlier hit a three-month low at $1,322.70. U.S. gold futures for February delivery settled down $12.2 at $1,332.30.
Spot prices are on course for a 6 percent decline in January, which would be the biggest monthly fall since a 7-percent drop in December 2009. Selling is largely a consequence of a current run of positive economic data.
"Nothing fundamentally has changed at all. It's just that too many investors have gotten long (bullish)," said Dennis Gartman, publisher of the Gartman Letter.
"The weakness in the past week and a half has made those late to the party uncomfortable, forcing them to sell. In the process, it will make the market healthy again," he said.
For the moment, strong consumer demand, particularly in Asia, continues to provide a floor for spot gold prices, dealers said.
However, trade data by the Commodity Futures Trading Commission (CFTC) showed investment interest, measured by the net speculative long bullish position in U.S. gold futures, fell to the lowest level since July of 2009. The significant decline in spec longs has eased some selling pressure, analysts said.
Adding to the case against gold was strong demand at the euro zone rescue fund's first debt offer, which helped push the euro to two-month highs. The single currency later lost ground in a volatile session .
The European Financial Stability Facility (EFSF) launched its first sale of bonds and market sources said demand, at 48 billion euros, dwarfed the 5 billion on offer.
REUTERS POLL SHOWS GOLD PLATEAUING
Longer term, ongoing jitters over growth and expectations interest rates will stay low for now are buoying analysts' expectations for gold, a Reuters poll of 65 analysts released on Tuesday showed.
However, they see prices plateauing next year as economic conditions normalize.
"We expect gold prices to continue to climb in 2011 as the resumption of quantitative easing should keep U.S. real interest rates low," Goldman Sachs said in a report.
"However, with the current round of QE set to end in June 2011, and our U.S. economics team now forecasting strong U.S. economic growth in 2011 and 2012, we expect U.S. real interest rates to begin to rise into 2012, likely causing gold prices to peak in 2012."
Spot silver fell 0.5 percent to $26.79 an ounce, having earlier fallen to $26.54, its lowest in nearly two months.
ETF flows have also undermined silver. Holdings of metal in the iShares Silver Trust, the world's largest silver ETF, have fallen by 425.3 tonnes so far this month, worth about $364 million at today's prices.
Platinum fell for a second day, down 1.8 percent to $1,779.99 an ounce, while palladium fell 3.7 percent to $779.97, set for its biggest daily fall since mid-November.
(Additional reporting by Amanda Cooper and Jan Harvey in London; editing by Sofina Mirza-Reid)