Gold Closes Below $1,700

Gold prices today fell below a key support level the yellow metal's 200-day moving average which was at $1,676. Once gold prices broke down below that support level stop-loss orders kicked in and prices kept falling until they had lost nearly 2 percent. The yellow metal appeared to find a bottom in the low $1,660s. From that point it rose about $10 to close below $1,700 for the first time in six weeks. In Chicago, the Comex said the trading volume today was unusually heavy.

There were lots of things that drove down the price of gold in the early part of the session. The main one was a report that China is cutting its growth forecast.  Add to that fresh data that Europe is very very likely to either be in a recession or go into a recession - not to mention the now two-year-old Greek sovereign debt crisis -- and you have the ingredients for a rough day. The third factor weighing on gold was a report from the O-E-C-D that inflation was falling in developed economies. Gold does well when there's inflation but it doesn't do so well when there's deflation. It didn't help that the president of the Dallas Federal Reserve said yesterday in a speech that there was absolutely no need for more quantitative easing.

Stocks took all the news badly. The main equity indexes in France and Germany lost more than 3 percent. In the U.S., shares were down on average more than 1 percent.

Silver also had a rough day. It dropped 2.7 percent. Platinum fell 2.6 percent to $1,616.49 and palladium gave up 3.5 percent to close at $678.22.