Gold lost more of its polish on Monday, tumbling nearly $2 as the dollar steadied against Asian currencies and oil prices retreated.

Spot gold cost $586.20/587.20 an ounce at 0123 GMT versus $587.80/588.80 in late New York trade.

Gold opened in Sydney at $587.00/588.00 an ounce.

Dealers cautioned gold appeared at the mercy of crude oil and, coupled with foreign currency movements, there was a possibility of a drop to $550 an ounce if bullion was dip under $580, triggering stop-loss orders.

"There could be some downside momentum building for gold," one said.

Gold hasn't traded below $550 an ounce since mid-June.

Gold was also hurt by figures released in Australia forecasting a 12 percent rise in national gold exports this year amid growing global supplies.

Australia, the world's third biggest gold producing country behind South Africa and the United States, should produce 280 tonnes in fiscal 2007 versus 250 tonnes the previous year, according to the Australian Bureau of Agricultural and Resource Economics.

So far this year, European central bank gold sales are estimated at only around 380 tonnes, which means they still have an allowance of another 120 tonnes before Sept 26 under a multi-year supply-limiting pact.

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The second year of the European Central Banks Gold Agreement (CBGA) came into effect in September 2005.

Central banks and the International Monetary Fund (IMF) collectively hold 30,733 tonnes of gold in their reserves, but have been gradually reducing their holdings.

In March 2004, 15 European central banks renewed a 1999 pact to limit their sales over a five-year period to 2,500 tonnes, with annual sales limited to 500 tonnes.

Spot silver shed 10 cents to $11.05/11.12 from

$11.15/11.22.

A stronger dollar makes commodities costlier for holders of other currencies and often weighs on near-term demand.

Gold also faced downward pressure as crude prices softened.

Dealers cautioned gold appeared at the mercy of crude oil and, coupled with foreign currency movements, there was a possibility of a drop to $550 an ounce if bullion was dip under $580, triggering stop-loss orders.



Oil prices fell on Monday to a new six-month low under $60 a barrel as news of BP restoring output at Prudhoe Bay added to a sense of healthy supplies.

Platinum was $1,131.00/1,136 an ounce against $1,142/1,147 late in New York Friday.

Palladium was up $1 to $314.00/319.00 an ounce from $313/319.