Gold slipped more than half a percent on Thursday and could revisit its weakest level in two months as investors sold bullion to cover equities losses ahead of Europe's bank stress test results this week.
Gold has fallen more than 6 percent since hitting a lifetime high around $1,264 an ounce in late June on worries the debt crisis in Europe would spread.
But dealers expected more losses if the results of the European Union examination of banks due on Friday show generally positive results for Greece, Italy and Ireland and a few failures in Portugal and Spain as expected.
If it's positive for risk assets, it would definitely dent demand for gold. I would look at on the downside of probably $1,175 but I don't see it dropping below that, said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.
I think even if we see buying for gold today, it wouldn't be too significant because people are really looking toward that big event at the end of the week.
Gold fell $7.60 to $1,184.20 by 0532 GMT, within sight of a two-month low at $1,175.35 hit on Tuesday. Comments from Federal Reserve Chairman Ben Bernanke that the U.S. economy faced unusually uncertain prospects also weighed on gold, but spurred a rally in bonds.
In the physical sector, jewelers waited for more declines in prices after snapping up gold bars earlier this week ahead of the festive season in India and Indonesia, but dealers in Tokyo saw steady demand from the electronics sector.
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.
U.S. gold futures for August delivery fell 0.55 percent to $1,185.3 an ounce.
Gold is likely to be bound in a tight range, before the results of stress tests on European banks are released tomorrow, which may give a direction on the future move of gold, said Li Ning, an analyst at Shanghai CIFCO Futures.
Silver tracked gold lower, while platinum and palladium were under pressure from weaker equities.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P), said holdings were unchanged at 1,308.128 tonnes. The holdings hit a record at 1,320.436 tonnes on June 29.
Oil slid for a second day on Thursday, a day after Bernanke rekindled unease across financial markets about the pace of economic recovery, while rising U.S. inventories also kept prices in check.
(Editing by Ed Lane)