Gold yesterday traded down -0.68% at 26131 as renewed liquidation in gold-exchange traded funds and its recent drop below the $1,400-per-ounce level spooked bullion investors, prompting them to favor other assets. The fall below $1,400 in the previous session triggered heavy selling and that the yellow metal might retest two-year lows of $1,321.35 touched on April 16, when it recorded the worst daily loss for 30 years. Rallying Wall Street stock indexes have hurt bullion's appeal as an alternative investment this year, leading to hefty outflows from gold-backed exchange traded funds. Gold investment nearly halved in the first quarter as a brighter view of the U.S. economy prompted investors in the West to favor assets such as stocks over bullion, the World Gold Council said. Lower gold prices have attracted physical buying in China. The world's second-largest consumer after India bought a large amount of gold. Premiums for gold bars rallied to all-time highs in Hong Kong and Singapore on Thursday after bullion's steepest drop since its April selloff fueled another round of buying, constricting supply. The Federal Reserve Bank of Philadelphia reported earlier that its manufacturing index fell to -5.2 in May from 1.3 in April. Thursday's data came in wake of soft industrial output and producer-price reports released. Talk of the Federal Reserve keeping monetary policies loose often sends gold gaining, as stimulus tools tend to weaken the dollar, which historically trades inversely with gold. Technically market is under long liquidation as market has witnessed drop in open interest by -0.31% to settled at 13173 while prices down -179 rupee, now Gold is getting support at 25920 and below same could see a test of 25709 level, And resistance is now likely to be seen at 26282, a move above could see prices testing 26433.

Trading Ideas:

Gold trading range for the day is 25709-26433.

Gold dropped as investors spooked by recent price falls favoured other assets.

Sentiment on the precious metal was further dampened after data showed that hedge fund billionaire George Soros cut his holdings.

SPDR Gold Trust, said its holdings fell 0.55 percent to 1041.42 tonnes on Thursday - the lowest in four years.