Gold struggles to hang on to July recovery

The yellow metal sunk deeper on Wednesday as Asian markets opened, extending Tuesday's decline and pulling gold to a spot price of $1,277 – its lowest since mid-July.

August has not been kind to the precious metal so far: Gold has been falling sharply since August 1 after soaring past the crucial $1,300 mark last month.

As usual, speculations about US Federal Reserve policies are to blame for the decline: On Tuesday, the president of Chicago's Federal Bank said that the labour market has seen "good improvement" and hinted at a possible September end to the Fed's $85-billion bond-purchasing program, Bloomberg reports.

On Monday, Richard Fisher, president of Dallas' federal reserve and a major critic of quantitative easing, also said that the asset purchasing policy is “closer to execution mode.”

But last month Ben Bernanke, chairman of the US Fed, said it was "way too early" to make a decision on when to pull the plug on QE.

Silver also lost, shedding 0.67% to trade at $19.38.

RELATED: Ben Bernanke does not control the gold price: World Gold Council