Gold held the bulk of the biggest drop in more than a week, as traders weighed recent gains in the dollar against a wider risk-off tone across markets.
Spot bullion steadied near $3,940 an ounce, after sinking almost 2% in the previous session as a gauge of the US currency rose for a fifth day. Global stocks extended losses on Wednesday after suffering the steepest drop in nearly a month on concerns over elevated valuations. Most other commodities also fell.
Bullion’s drop on Tuesday came as a trio of Federal Reserve policymakers stopped short of supporting an additional cut in December as they weighed the competing risks from inflation and a softer labor market. Investors will have an opportunity to hear additional viewpoints this week, with St. Louis Fed President Alberto Musalem and Cleveland Fed chief Beth Hammack among officials slated to make remarks.
Gold remains about 50% higher year-to-date, with prices touching a record last month before retracing some gains. The pullback — which followed a slew of signals that the ascent had been too rapid — was accompanied by withdrawals from bullion-backed exchange-traded funds. Traders are now trying to assess whether the metal’s drop has run its course.
“It should not be a big surprise to see the yellow metal consolidate in a lower, $3,800-to-$4,050-an-ounce trading range,” TD Securities strategist Bart Melek said in a note, citing factors including ambiguities over the outlook for Federal Reserve rate cuts, as well as concerns over retail buying in China.
Still, the factors that contributed to gold’s gains this year are still mostly intact, and elevated official-sector buying and strong demand from private investors should send prices back up after the consolidation phase, he added.
Gold rose 0.2% to $3,939.38 an ounce as of 10:22 a.m. in Singapore. The Bloomberg Dollar Spot Index was steady after closing at the highest level since mid-May. Silver was flat, while palladium and platinum dropped.
