Gold price dips below $1,300

The gold price briefly dipped below the psychologically important $1,300 level on Wednesday, the lowest in more than six weeks.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery last traded near its lows for the day of $1,299.90 an ounce, down $11.50 or nearly 1% from yesterday's close.

The yellow metal has taken a hammering during the past eight trading sessions – gold is down from a high above $1,380 reached on Monday last week which was best level since June.

On a technical basis gold is also close to dangerous waters with a key indicator – the 200-day moving average – currently sitting at $1,296.60. If the gold price should fall through this level all bets are off concerning further weakness.

Gold is still up some $100 since the start of the year, but positive news from top consuming region Asia and bullish positioning from speculators in New York has not been able to turn around recent negative sentiment.

Instead, large investors on the futures and options market appears to have used this week to lighten their long positions (bets that the price will go up), while investors in gold-backed ETFs booked some profits from gold's strong showing in 2014.

Last week saw the first reduction in four weeks of holdings in exchange traded funds backed by physical gold. The reduction was small, only 0.2 tonnes, but the loss of positive momentum has soured sentiment.

An underlying weakness has been expectations that interest rates will continue to rise in the US and boost the dollar. Gold, which unlike other financial assets provides no yield, competes with US bonds for investor money and gold and the dollar usually moves in opposite directions.

Picture of gold mannequins from Dali-Theatre Museum in Barcelona by Chirag D Shah.