Gold drops as Spain worries

Gold prices fell more than 1 percent on Monday as concerns over Spain's financial health pushed the euro to two-year lows against the dollar, pressured stock markets and drove Spanish borrowing costs to euro-era highs.

Gold recovered from lows with the euro after the International Monetary Fund said it will start discussions with the Greek authorities on July 24 on how to bring Greece's economic programme back on track, but remains under heavy pressure from losses in the euro and stock markets.

From a technical perspective, gold is set to find support around $1,559/1,560, according to analysts who study past price patterns to determine the future direction of trade. Prices have held within a $1,525-1,675 range for more than three months.

Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust dropped for a fourth consecutive week after a 2.4 tonne outflow on Friday, down 15 tonnes, their biggest weekly decline since late December.

Gold demand from major consumers India and China also remained weak, analysts said.

August gold futures on the COMEX today fell by $ 8.2 and now stands at 1574.6 dollars per ounce.