Gold is lacking direction ahead of key US employment data due Friday, with mixed views on physical demand.
ANZ said in a gold report that "the $100/oz decline in gold over the past two weeks was largely the unwinding of the 'safehaven' buying in gold and a stabilisation in global ETF holdings. Speculators have taken profit on recently-established longs, with CFTC data -- week to March 25 -- showing the largest single-week decline in gross long positions since December 2013."
Commerzbank said in a daily note that -- in contradiction to ANZ's view on ETF holdings -- "gold is trading [around] $1,280/oz and finds itself under additional selling pressure as a result of ETF investors. The last two days have seen outflows from gold ETFs total 8.8 mt. Clearly, investments are being shifted from gold into equities."
Head of precious metals at brokerage Marex Spectron David Govett was fairly downbeat on the market in his daily comment, saying the market is "stuck for the time being and will need some sort of outside influence to drive it one way or the other."
US non-farm payroll data, a closely watched barometer of the US economy, is due to be released Friday.
"Should Friday's payrolls data exceed expectations, then following on from the more hawkish Fed comments last month, gold certainly finds itself under pressure again," UBS strategist Edel Tully told clients.
Tully and ANZ disagreed over physical interest.
"Strong Chinese demand for physical gold is evident, but is not being corroborated by a high Shanghai-London gold premium," ANZ said. "The sharp increase in the ANZ Physical Demand Barometer towards the end of March -- following strong demand in February -- and the decline in London spot gold would usually correspond with a high premium. However, these effects have been offset by the depreciating Yuan."
However, Tully argued that gold could have further to go on the downside as physical buying is still lacking.
"Gold reached our one-month forecast of $1,280 this week. Despite its $100 decline from the year's high, gold hasn't found a host of willing buyers looking to pick up cheaper metal," wrote analyst Edel Tully.
"For sure, some buying interest has emerged on the lows, but further downside has been prevented largely because sellers are in short supply."
The analyst noted that physical demand remains lackluster "across a host of regions and this is an important signal -- gold needs that physical indicator to pick up in order to give the market some confidence that a floor is nearby."
On March 14 gold fixed in London in the afternoon at $1,385/oz, the highest fix of 2014 so far.
Gold opened 2014 with a morning fix of $1,219.75/oz, while on Tuesday it fixed in the afternoon at $1,283.75/oz.
Still, ANZ was more positive on gold.
"We have changed our near-term outlook to neutral from bearish. Technically, gold's recent decline is prime for a rebound but is likely to falter before $1,320/oz."
However, on a more cautious footing, VTB Capital analyst Andrey Kryuchenkov said: "Today all eyes will turn to the US labour market with the US ADP private sector employment survey preceding Friday's nonfarm payroll report. The downtrend could press bullion even lower, depending on how strong the dollar gets this week, while there are hardly any willing physical buyers to support gold on price pullbacks at the moment."