1) Commodity drops after the Federal Reserve lowered benchmark interest rates by three-quarters of a percentage point
2) Demand is less, correction coming
3) Money has been used for more wisely investment. Example: Property
SINGAPORE (Reuters) - Gold dropped more than 2 percent to its lowest level in a month on Thursday amid a broad-based sell off in commodities and as funds cashed in after pushing the metal to a record above $1,000 an ounce this week.
Platinum, palladium and silver also fell. New York's COMEX gold futures fell over 3 percent to hit their lowest in more than four weeks, while Shanghai futures sank by their 5 percent limit.
Gold tumbled to as low as $920.30 an ounce, down from $944.20/945.00 late in New York on Wednesday and off Monday's record high of $1,030.80 an ounce.
"We have to see whether the funds will continue selling. If they do, of course there is a possibility that it will go down and test $900," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
A smaller-than-expected U.S. interest rate cut was an excuse for the funds to exit gold and the absence of Japanese speculators also exaggerated movements, said Leung.
Gold tumbled 6 percent on Wednesday, its biggest one-day percentage drop in nearly two years as funds exited commodities, leading to declines in oil, base metals and agricultural products. Trading was thin on Thursday as the Tokyo Commodity Exchange was closed for a national holiday.
"The upshot is we hold our current view that gold prices will fall over the next six months as the U.S. dollar firms and oil prices fall," ANZ senior commodities analyst Mark Pervan said.
"We forecast spot gold to fall to $850 an ounce by the end of September before firming back towards $900 an ounce by end of the year as oil prices bottom."
Gold futures for April delivery on the COMEX division of the New York Mercantile Exchange fell $8.2 an ounce to $937.1 an ounce, after hitting a low of $915. The contract struck a record of $1,033.90 on Monday.
"It is most probably liquidation on margin calls. It looks like players are exiting the market after gold hit the $1,030 level and there's no reason for physical buyers to buy at high levels," said a dealer in Singapore.
"Retailers are also starting to cash in. That's why I think the market will still fall for another day. It's hard to say where the support level is, but I think it's going to fall below $900 today," he said.
The dollar firmed against the euro and came near 1-month highs versus the Australian dollar on Thursday, underpinned by sliding gold and oil prices, falling stocks and in spite of investor anxiety over troubled credit markets.
Spot platinum fell to $1,885/1,890 an ounce from $1,900/1,910 -- off a record high of $2,290 hit on March 4.
Silver dropped to $18.12/18.17 an ounce from $18.38/18.43 an ounce. Spot palladium fell to $447/454 an ounce from $455/460 an ounce.
The most active June contract on the Shanghai Futures Exchange fell by 5 percent to 214.55 yuan a kilogram, tracking declines in cash gold.