Local media reported that Congress has a clear advantage in exit polls in Haryana and Jammu and Kashmir
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Spot gold was bid at $1,364.50 an ounce at 1056 GMT, against $1,366.35 late in New York on Friday. US gold futures for December delivery fell $1.30 an ounce to $1,364.20.
The metal staged its biggest one-day fall since July 1 on Friday, retreating from last week’s record $1,424.10, on concern the market had become overbought and as talk of a potential interest rate rise in China knocked commodities sharply lower.
“The rise above $1,400 was probably premature and gold was overbought. Right now, I wouldn’t be surprised to see further weakness on a lack of a new speculative buying,” said Commerzbank analyst Eugen Weinberg.
He said newly resurfacing worries over the stability of certain euro zone economies, most notably Ireland, was “definitely helping” the metal. “That is the reason why we are not much lower.”
A spike in the borrowing costs of peripheral euro zone members over the past weeks has raised concerns about their ability to cut debt.
German government bond prices fell on Monday, however, as some safe-haven flows were unwound on talk that Ireland may ask the European Union for aid to manage its debt crisis. Ireland on Sunday did not rule out the possibility that it might have to turn to Europe to deal with its debt crisis but said that no application had been made for assistance yet.
Concerns over Ireland and other euro zone economies pressured the euro back towards last week’s six-week low, while the dollar index hit a six-week high, boosted by higher US Treasury yields.
A stronger dollar typically weighs on gold, because it dents interest in the metal as an alternative asset and makes it more expensive for holders of other currencies.
When both gold and the dollar benefit from rising risk aversion, as was seen at the height of the sovereign debt crisis in the second quarter of this year, they can move together. This may happen again if current euro zone debt fears worsen, analysts said.
“Once the dust settles, there will be plenty of willing buyers happy to move in on new lows,” said VTB Capital analyst Andrey Kryuchenkov in a note.
Caution abounded throughout the wider financial markets, with stocks in Asia and Europe falling on fears that Ireland may be forced to seek a financial rescue package.
Oil prices held near $85 a barrel after falling more than 3 percent on Friday, and base metals prices were soft as concerns over the prospect for a further Chinese interest rate hike lingered.
Silver was bid at $25.97 an ounce against $25.99, having underperformed gold on Friday to fall more than 6 percent, its biggest one-day decline since early February.
Among other precious metals, platinum was at $1,672.24 an ounce against $1,679, while palladium was at $668.47 against $675.50.
Although it is underperforming other precious metals on Monday, palladium remains on track to post the biggest gains of the complex this year, on expectations that demand from automakers and other industrial users will rise.
Local media reported that Congress has a clear advantage in exit polls in Haryana and Jammu and Kashmir
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