Gold prices remain under pressure after hitting 5-year low

Gold prices remain weak after they hit a five-year low on 20 July, as analysts expect further erosion in the value of the precious metal.

Bullion is trading down 1.11% at 1,091.20 (£701.17, €1,003.99) per ounce on Comex as at 6.51am GMT.

Gold prices fell to as low as $1,088.05 an ounce on 20 July – the weakest level since March 2010 – led by a selling spree in China and expectations of an increase in US interest rates.

The prices recovered from the lows since then, as the rapid high-volume trading in the Comex market, which sparked the decline in China, seems to have abated. However, a significant recovery in prices is not expected, given no noticeable short-covering, or follow-through selling, according to analysts.

"The losses in the gold market on Monday have held, with the market showing little desire to 'buy the dip'," said Victor Thianpiriya, commodity strategist at ANZ Bank.

"With the dust somewhat settled, we expect gold to continue to remain under pressure."

"More volatility may come, but it looks like the market has not taken the opportunity to cover short positions or indeed, used the decline in prices as a buying opportunity," he added.

Gold earlier breached the key support level as the dollar gained following Federal Reserve Chair Janet Yellen's comment that the central bank is on course to raise interest rates if the US economy continues to expand.

Thianpiriya noted that trading volume in the main deferred contract of the Shanghai Gold Exchange, the largest physical gold exchange in the world, totalled 39 tonnes on 21 July, following 81 tonnes traded on 20 July.

The volatile price action has not dented the interest of onshore traders, he said.

The US Fed is expected to increase benchmark interest rates before the end of 2015, and investors in gold are selling as the commodity's appeal as an investment is steadily declining.

Among other precious metals, silver has lost 0.91% at $14.65 per ounce, platinum spot has fallen 0.76% at $970.86 and palladium spot has shed 1.05% to $621.07.