LONDON (Commodity Online): Gold continued its slide on Wednesday with a fall of 1% to hit a near two-month low as prices broke below a major upward trend, but the metal could rebound on near-term technical support.

Weak US housing sentiment and competition from other asset classes such as government bonds, equities and industrial commodities pressured the metal, which is used as an inflation hedge.

COMEX August gold futures have broken below a major up-trend line dated back from a February low after suffering a price breakdown on Friday.

However, the bullish pattern remained intact based on continuous one-month futures and spot gold despite August's weakness.

Those looking to buy a pullback intending for significantly higher prices in the future are close to the major support line and a natural buying point.

Gold's 1.5% slip last week was due to a combination of weak US inflation data, outflow from the world's largest gold exchange-traded fund and competition from government bonds.

Analysts said some short-term investors were spooked by the metal's failure to hold above $1,200 an ounce.

The liquidation is taking gold closer to closely watched technical levels, and this has potentially initiated further selling.

Gold's lack of momentum has turned investors away from the metal. This may well continue for a while unless the (bank) stress tests results prove worrisome.

A sovereign credit downgrade of Ireland by Moody's failed to boost safe-haven demand for gold.

Some of the risk premium that has gone into gold, primarily from the banking worries, has been all but silenced for now, so that is removing a bit of the support.

Gold has struggled to hold its ground since hitting a record $1,264.90 an ounce in late June on concerns over euro zone sovereign debt, which boosted interest in the metal as a hedge against currency volatility.