Gold price drops below $1,600, continues worse monthly losing streak in 16 years

The gold price fell by as much as $25 on Wednesday to touch a low of $1,591 and erasing much of the gains of the previous day.

Ben Bernanke's testimony in front of US Senate members praising the Fed's QE program and suggesting that it should stay in place into 2014 lifted gold yesterday.

But today's positive economic news in the US – better than expected housing data –  had the opposite  effect as it signaled that the Fed's ultra-accomodative monetary policy may end sooner rather than later.

QE, which floods markets with cheap money, increases gold's allure as a hedge against inflation amid currency depreciation.

In late afternoon trade gold for April delivery was off its lows changing hands for $1,594, still down $21 on the day.

Gold is down over 3% in February and is set for its fifth monthly drop in a row.

The last time that happened was in January 1997.

Holdings in gold-backed ETFs dropped to a 5-month low of 2,530 tonnes on Tuesday, data compiled by Bloomberg show, the worst performance since April 2008.