Gold Prices Drop Ahead of G7 Meeting (Update1)

(Updated from 12:32 p.m. ET with closing prices.)

NEW YORK ( TheStreet) -- Gold prices plunged on Monday ahead of this week's Group of Seven meeting.

Gold for April delivery dropped $17.80 to settle at $1,649.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,670.30 and as low as $1,644.10, while the spot price was declining $17.50, according to Kitco's gold index.

"Today the lower gold price is the fact that the market's been very much range-bound for a while, funds are still relatively long, with China on holiday there's an absence of physical interest underneath the markets," said James Moore, an analyst at "The funds have taken advantage of some of that, and obviously decided to test the bottom and test the supports."

Silver prices for March delivery fell 53 cents to close at $30.91 an ounce, while the U.S. dollar index was inching up 0.1% to $80.29.

Most major Asian equity indices were shuttered on Monday as investors there took a holiday for the Lunar New Year. It is a weeklong holiday in China, which analysts have said would erode physical demand for the yellow metal this week.

The G7 summit could grab attention from gold traders as reports have said the participating nations may issue a statement about currency exchange rates.

The statement is expected to say that the G7 countries won't engage in unilateral currency devaluation, according to sources cited by Reuters.

The Bank of Japan implemented looser monetary policy two weeks ago, as Prime Minister Shinzo Abe has pushed for more accommodative easing. Following the move, Bank of Japan Gov. Masaaki Shirakawa announced that he would be stepping down sooner than expected, which suggested that Abe may be winning his push for looser policy moving forward.

The Japanese yen, the euro and the U.S. dollar have experienced some swings as a cheapening in the Japanese currency was followed by a speech last week from European Central Bank President Mario Draghi talking down the euro -- a move that may keep the currency's value rising too quickly for inflation.

An inflationary environment is usually seen as a positive for gold.

The gold price also dipped below $1,660 an ounce, which George Gero, a precious metals strategist at RBC Wealth Management, wrote is a key sell-stop level. This, simply, could also be contributing to Monday's heavy selling.

Gold-mining stocks closed mostly lower on Monday. Shares of Yamana Gold ( AUY) dropped 4.8%, while Agnico-Eagle Mines ( AEM) slipped 2.8%.

Among volume leaders, Kinross Gold ( KGC) sank 2.1%.

Gold ETF SPDR Gold Trust ( GLD) lost 1.2%, while iShares Gold Trust ( IAU) decreased 1.1%.

-- Written by Joe Deaux in New York.

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