Djokovic has struggled in the final weeks of the season

The third seed's aggressive approach failed to wear down Ferrer, who returned everything the 20-year-old Serbian could throw at him.

Errors crept into Djokovic's game and Ferrer's consistency saw him through.

In Sunday's other gold group match, fellow Spaniard Rafael Nadal recovered from a slow start to beat Richard Gasquet 3-6 6-3 6-4.

Nadal looked to be suffering a hangover from his Paris Masters final loss to David Nalbandian as Gasquet made the better start.

I had a perfect first set, and after that I fought. I played incredibly but he has such a great forehand Richard Gasquet on Rafael Nadal

But he found his form in the second set to level and served out for victory.

"I finished the match playing much better than I started," Nadal said.

"In the beginning I was a little bit nervous. Matches here are always very difficult because you play against the best.

"So I started the match with a few doubts but later I played more aggressively. It was important to get the break in the beginning of the second set and I finished much better than I started."

606: DEBATE Djoko has been poor of late. I agree this tired excuse is becoming tiresome in itself TheOpinion

Nadal is seeking his first win in the elite tournament after pulling out injured in 2005 and losing to Roger Federer in last year's semi-finals.

Gasquet, making his first Masters Cup appearance, was pleased with his performance despite his defeat.

"Rafael is a fighter, he fights a lot. I missed some shots, and when you miss some shots against him, the set is finished," the Frenchman said.

"I had to play a perfect match to win. I had a perfect first set, and after that I fought. I played incredibly but he has such a great forehand."

Nadal is looking to end the season on a high note

Djokovic made 41 unforced errors during his defeat and a late fightback came too late to salvage the match.

"It wasn't my day," he said. "He proved that he's a great player and absolutely he deserved to win."

Ferrer said: "I think maybe he was a bit nervous. I'm playing with confidence. Mentally I am very confident and I'm in great shape physically at the end of the season."

The Masters Cup sees the world's top eight competing in two round-robin groups, with the top two from each advancing to the semi-finals.

The red group gets under way on Monday, with Andy Roddick taking on Nikolay Davydenko and defending champion Federer up against Fernando Gonzalez.

ATP Masters Cup, Shanghai, 11-18 November:

Red Group:
Roger Federer (Swi)
Andy Roddick (US)
Nikolay Davydenko (Rus)
Fernando Gonzalez (Chi)