Gold dropped to its lowest in two-weeks on Wednesday as hopes of quick economic recovery drove investors towards riskier assets, while US-China tensions over Hong Kong put a floor under bullion prices.
Spot gold was down 0.3 per cent at $1,705.91 per ounce by 4:35 pm. US gold futures fell 0.5 per cent to $1,697.40.
“It’s very important for gold prices to stay above $1,700. Otherwise, if the price correction continues, speculative investors are likely to leave this boat and increase pressure on prices,” said Commerzbank analyst Eugen Weinberg.
“One can mention the geopolitical tensions are contributing somewhat and supporting gold prices currently. But, until now this situation has failed to ignite fears on the equity market.”
Optimism about the development of coronavirus vaccines and a revival of business activity has lifted risk sentiment in the financial markets.
After a batch of poor economic readings out the United States, data on Tuesday showed US consumer confidence nudged up in May and new home sales beat expectations.
Despite the pullback in bullion prices, the outlook remains positive for gold, which is seen as a safe-haven asset during political and economic uncertainties, analysts said.
Risks for a temporary short-term gold market unwind to a low- to mid-$1,600 level seem to be rising, Citi said in a note, adding that they “remain outright bullish (on) gold over the medium term and forecast that $2,000 ounce will be breached in the next 12 months.”
Growing political unrest in Hong Kong over Beijing’s proposed national security laws has kept investors on the edge.
US President Donald Trump said Washington was working on a strong response to China, adding it would be announced before the end of the week.
Elsewhere, palladium eased 0.1 per cent to $1,954.32 per ounce, while platinum gained 0.3 per cent to $832.41 and silver edged 0.1 per cent higher to $17.11.