(Reuters) - Gold prices fell more than 1 percent on Monday on technical selling and concerns that the European Union summit had stopped short of producing a convincing plan to solve the euro zone debt crisis.
The approaching year-end and funding difficulties caused by financial market turmoil have reduced liquidity in the gold market, leaving prices prone to volatility. Spot gold prices fell more than $10 in just two minutes.
Investors remained nervous even after Europe secured a historic agreement on Friday to draft a new treaty for deeper economic integration in the euro zone.
"People are still worried about the economy and euro zone debt crisis and gold remains under pressure," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
A stronger greenback also weighed on dollar-priced gold. The euro slipped in Asia on Monday, and was expected to struggle going into the year-end.<USD/>
Spot gold lost as much as 1.7 percent to a two-week low of $1,681.39 an ounce, and regained some lost ground to $1,690.65 by 0735 GMT.
The most-active U.S. gold futures contract lost 1.7 percent to $1,688, before recovering to $1,694.70.
Traders said the price move below $1,700 triggered stop-loss selling.
"On the technicals, we are heading for a triangular formation. If we move lower, we'll break to the downside and that is a bad signal," said Dominic Schnider, head of commodity research at UBS Wealth Management in Singapore.
Gold from Hong Kong to mainland China jumped 51 percent on the month to a record high of 85.7 tons in October, as buyers took advantage of lower prices.
Silver slid along with industrial metals, losing more than 2 percent under the pressure of technical selling and an uncertain euro zone economic outlook. <MET/L>
Spot silver fell to a 1-1/2-week low of $31.37 an ounce, before trimming some losses to $31.51.
U.S. silver dropped 2.5 percent to $31.46, and recovered to $31.59.
On this week's agenda, bond sales by Italy and Spain will attract much attention from investors. Yields are likely to rise again after the European Central Bank last week dashed hopes for further bond purchases.
Prices of platinum group metals also weakened. Spot palladium fell 1.5 percent to $673, and spot platinum lost 0.8 percent to $1,499.75.
Demand for industrial metals will largely hinge on the growth in China, the world's second-largest economy and top consumer for many raw materials. Slower growth in China's exports and imports in November showed fresh evidence of faltering demand abroad and at home.
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