Gold prices have hovered above $US1,600, having slipped below that level for the first time in six months after regulatory filings showed that several high-profile fund managers cut back their bullion holdings.
Gold for April delivery, the most active contract, on Friday fell $US26, or 1.6 per cent, to settle at a six-month low of $US1,609.50 a troy ounce on the Comex division of the New York Mercantile Exchange.
Gold prices slumped to an intraday low of $US1,596.70 after filings showed billionaire investor George Soros pulled around $US100 million out of his gold holdings during the third quarter.
Soros Fund Management LLC sold 55 per cent of its stake in SPDR Gold Trust (GLD), a physical gold-backed exchange-traded fund, Securities and Exchange Commission documents show.
Soros's remaining stake of 600,000 shares was worth around $US97.2 million ($A94.36 million) at December 31.
"When you get headlines like Soros is pulling out ... that's enough to blow out any weak (investors) in the market," said Bob Haberkorn, a senior commodities broker with RJO Futures.
"This move, it's big enough to put some panic in the market," Haberkorn said.
Several other large investors also cut back on their gold holdings, the quarterly regulatory filings showed.
BlackRock Advisors LLC, a unit of the world's largest money manager, BlackRock Inc, cut its holdings of SPDR Gold Trust by eight per cent and trimmed other ETF holdings.
Hedge fund Moore Capital Management sold its entire stake in SPDR Gold Trust, totaling 100,000 shares, and cut its Sprott Physical Gold Trust holding by 53 per cent.
Market watchers said that gold, which entered correction territory after losing more than 10 per cent off its October high, is likely to decline further. A market correction can wipe 10 per cent to 15 per cent off prices without endangering the longer-running upward trend, analysts and brokers said.
"After having a decade-plus bull market, you're going to have some pain along the way," said Adam Klopfenstein, senior market strategist with Archer Financial Services.
"If you're going to be involved in gold long term, you can't always expect it to go up, up, up," Klopfenstein said.
Haberkorn said gold could slip toward $US1,585 a troy ounce in the coming days. Other brokers have pointed to $US1,520 as the next likely area of support for prices.
Gold prices have been under pressure in recent months, as a resurgence in equity markets pushed investors toward riskier assets such as stocks. The Dow Jones Industrial Average is trading near the closely watched 14,000 level and in sight of its all-time high.
Unlike bonds or equities, gold doesn't pay investors any interest or dividends, leading many people to say "maybe I don't need to own gold right now," said Ira Epstein, director of the Ira Epstein division at Linn Group.
Signs of a global economic recovery also have put investors in a brighter mood, easing long-running concerns and leading them away from safe-haven assets such as precious metals.
"You don't really have safe-haven buying right now. There's no fear story," said Charles Nedoss, a broker with Kingsview Financial.
Still, some of gold's oldest fans are holding their ground. John Paulson, another billionaire investor and longtime gold supporter, maintained his $US3.5 billion ($A3.40 billion) gold holdings. Paulson's hedge fund, Paulson & Co, reported its SPDR Gold Trust stake as unchanged at 21.8 million shares.
This isn't the first time Soros backed away from gold only to return a few quarters later.
Soros had dubbed gold "the ultimate asset bubble" early in 2011, cutting back his gold holdings to around 50,000 shares and keeping his stake low through the first three quarters of that year.
But 2012 saw Soros pile back into gold, topping up his bullion hoard during the first three quarters of that year.
Some say bargain buyers may step up their gold purchases next week as traders in China, the world's largest gold consumer after leader India, return from a weeklong holiday.
But Credit Suisse precious-metals analyst Tom Kendall said the seasonal peak for Chinese jewelry purchases already has passed for 2013 and merchants there may not be in a hurry to buy.
"In our view Chinese traders are not in the habit of trying to catch falling knives," Kendall said.
Elsewhere, silver futures followed gold's lead, settling at their lowest level in nearly two months. Investors often use silver as a cheaper alternative to gold, making silver prices vulnerable to gold's influence.
Silver for March delivery fell 50.4 US cents, or 1.7 per cent, to settle at $US29.849 a troy ounce on the Comex. This was the lowest settlement price since December 20.
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,612.25; previous PM $1,646.00
Apr gold $1,609.50, down $26.00; Range $1,596.70-$1,636.00
Mar silver $29.849, down 50.4 cents; Range $29.660-$30.460
Apr platinum $1,677.70, down $33.20; Range $1,671.10-$1,716.90
Mar palladium $753.15, down $10.90; Range $748.10-$765.35