December 29, 2011 / 12:50 AM / 7 years ago

Gold down over 1 percent, in bear market territory

NEW YORK/LONDON (Reuters) - Gold fell more than 1 percent on Thursday to its lowest level in nearly six months, as year-end liquidation by funds and early losses to the euro on debt fears pushed bullion into bear market territory.

Gold and silver bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011. REUTERS/Lisi Niesner

The precious metal, which has recently moved in tandem with riskier assets, broke ranks with equities which rebounded after the previous day’s decline.

Technical selling and the need for hedge funds to raise cash to meet client redemption at year-end triggered gold’s decline which was exacerbated by thin holiday volume.

“It wouldn’t surprise me to see that there is some fund selling of gold because of additional liquidation at the end of the year,” said Adrian Day, president at Adrian Day Asset Management, which has $165 million in assets.

“The main problem going forward is the continuing strength of the dollar because no other major currency has much validity at the moment,” Day said.

Spot gold fell 1.2 percent to $1,536.70 an ounce by 12:13 p.m. EST (1713 GMT). It has earlier hit a low of $1,521.94, the weakest since July 6.

The metal has now lost more than 20 percent of its value from its intraday record high of $1,920.30 an ounce set on September 6, the common definition of a bear market.

U.S. gold February futures dropped $25.60 to $1,538.50.

Silver fell 0.3 percent to $26.96 an ounce, sharply off its session low of $26.19, which came within striking distance to a 13-month low.

Gold prices have recently been trading in lockstep with the euro, which fell below $1.29 for the first time in 15 months as fear that Europe’s debt crisis could worsen next year. <USD/>

The euro later recouped losses and traded flat against the dollar.

Bullion also ignored a near 1 percent rebound in the S&P 500 index on better-than-expected U.S. pending home sales data. .N

Additional reporting by Silvia Antonioli in London; editing by William Hardy and Andrea Evans

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