China said it boosted bullion assets to about 1,658 metric tons, less than brokers at GoldCore Ltd. and Sharps Pixley Ltd. expected.
Futures dropped to the lowest since 2010 on Friday as signs of improving U.S. economic growth further diminished the metal’s appeal as a haven.
With investors in the U.S. scoffing at the precious metal, bulls were holding out hope that buying from China could help to buoy demand.
The Asian country is the world’s biggest gold producer and vies with India as the top consumer.
The price rout worsened the outlook for miners, with shares of Barrick Gold Corp. dropping to the lowest since 1991 on Friday.
“I’m shocked by how small the figure is,” Ross Norman, chief executive officer of dealer Sharps Pixley, said by telephone from London, referring to China’s gold reserves. “I don’t think I was alone in thinking they have accumulated three times as much.”
Gold futures for August delivery dropped 1 percent to settle at $1,131.90 an ounce at 1:49 p.m. on the Comex in New York, after touching $1,129.60, the lowest since April 2010.
The reserve figures “were disappointing in some aspects and reflected that China isn’t adding gold as much as people thought it was,” Bernard Dahdah, a precious-metals analyst at Natixis SA in London, said in a telephone interview.
“It begs the question of what’s been happening to the gold produced that hasn’t been taken by the central bank.”
Prices extended losses after a government report showed new-home construction in the U.S. climbed in June to the second-highest level since 2007.
The metal posted a fourth straight weekly decline as Federal Reserve Chair Janet Yellen has indicated that the central bank will increase interest rates this year amid the improving economy.
Higher rates cut the appeal of precious metals because they don’t pay interest or give returns like other assets such as bonds and equities.
Gold futures in New York fell for a seventh straight session, the longest streak since November.
Shares of Barrick Gold, the world’s biggest producer of the metal, fell as much as 6.5 percent in Toronto.
The Philadelphia Stock Exchange Gold and Silver Index, a gauge of miners, slumped as much as 4.4 percent, reaching the lowest since January 2002.
“There is just no interest in the market to own gold,” Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion, said by telephone.
“The Fed’s hawkish stance is the biggest culprit for the decline that we are seeing in the precious-metals market.”
Silver futures for September delivery slid 1 percent to $14.834 an ounce, falling for a fifth straight session.
Platinum futures for October delivery dropped one percent to $1,001.30 an ounce on the New York Mercantile Exchange.
Earlier, prices fell to $996.60, the first time the metal traded under $1,000 since February 2009. Palladium futures for September delivery declined two percent to $619 an ounce.