Gold prices dropped further in Asian trade Thursday along with stocks as markets await outcome of Europe's bank stress test.

Gold for immediate delivery was seen trading at $1185.71 an ounce at 12.00 noon Singapore time while U.S. gold futures for August delivery was at $1,185.3 an ounce.

Meanwhile, the world's largest gold-backed exchange-traded fund, SPDR Gold Trust said holdings were unchanged at 1,308.128 tons. The holdings hit a record at 1,320.436 tons on June 29

Analysts said gold remained highly volatile and might touch its weakest level in two months later in the day as investors sold bullion to cover equities losses ahead of Europe's bank stress test results later this week.

Gold has fallen more than 6 percent since hitting a lifetime high around $1,264 an ounce in late June.

Investors were looking for more clues from Fed Chairman Ben Bernanke's testimony to the Senate Banking Committee.

Comments from Federal Reserve Chairman Ben Bernanke that the U.S. economy faced unusually uncertainprospects also weighed on gold, but spurred a rally in bonds.

Stocks dropped across Asia on concerns about the health of the U.S. economy while the euro regained strength on growing optimism major listed banks could pass the EU stress tests.

On Wednesday, gold for August delivery closed at $1,191.80 an ounce on the Comex division of the New York Mercantile Exchange.