Gold slides for 5th straight session

By Kaitlyn Kiernan

Gold (-GC) was falling for the fifth consecutive day Wednesday because of two factors: the strengthening dollar and growing concern that demand is weakening in the world's two largest countries.

Gold for February delivery was dropping $28 to $1,567.50 an ounce at the Comex division of the New York Mercantile Exchange. The metal has traded as high as $1,595 and as low as $1,571.80 an ounce, while the spot price was down $20, according to Kitco's gold index.

Silver (-SI) prices for March delivery were down $1.38 at $27.36 an ounce, while the U.S. dollar index was gaining 0.4% to $80.18.

Gold was declining after a Chinese government crackdown on illegal gold exchanges raised concern that demand there would weaken.

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China's central bank ordered all gold exchanges, with the exception of two official exchanges in Shanghai, to cease operations, according to a statement Tuesday. The two official exchanges, the Shanghai Gold Exchange and the Shanghai Futures Exchange, are enough to meet domestic demand for the metal, said the notice, released jointly by the People's Bank of China and the Ministry of Public Security.

The Chinese crackdown on illegal gold trading venues comes after an announcement earlier in the week that demand for gold from India, the world's second-largest country by population, may also decline. Indian imports of the metal may drop 50% this month as the rupee's tumble against the dollar continues for a fourth month, according to the Bombay Bullion Association.

The currency slid to 53.03 rupees to a dollar on Dec. 27, from 44.08 on Aug. 1. The lower rupee makes gold, a dollar-backed commodity, more expensive to buy in India.

Italy's successful bond auction also put pressure on the precious metal.

The country successfully sold 9 billion euros ($11.8 billion) in six-month bonds at auction Wednesday at a rate far lower than at its auction on Nov. 25. The Italian treasuries were sold at a rate of 3.251%, compared with 6.504% last month. 2013 year notes also sold at a lower rate of 4.853%, down from a yield of 7.814% on Nov. 25.

Italy's lower borrowing costs dampened chances of the European Central Bank printing more euros to stem the debt crisis, reducing demand for the metal as a haven against inflation.

Gold mining stocks followed the metal lower Wednesday. Goldcorp (GG) was falling 1.6% to $43.54. Barrick Gold (ABX) was dropping 1.9%% at $44.65. Kinross Gold (KGC) was declining 1.9% to $11.34.

Smaller mining companies also fell. Agnico-Eagle (AEM) was slumping 1.7% to $35.51. Hecla Mining (HL) was dropping 2.4% to $5.27.