Gold registered heavy declines on Wednesday (19 April) as its geopolitical risk-driven rally was brought to a grinding halt on profit-taking by traders and a relatively stronger dollar.
At 4.25pm BST, the Comex gold futures contract for June delivery was down 1.02% or $12.81 to $1,281.40 an ounce, while spot gold was down 0.78% or $10.07 to $1,279.69 an ounce, as the dollar recouped some of the losses it suffered in the previous session, when it tumbled to a three-week nadir.
The greenback was 0.41% and 0.52% higher against the yen and the Australian dollar, trading at ¥108.87 and AUD$1.3301 respectively and gaining 0.43% against the Canadian dollar to trade at CAD$1.3437.
"Ultimately we think the [dollar] rally can resume as markets start to focus on stronger US growth driven by capital expenditure that could drive inflation higher," analysts at Morgan Stanley said.
However, London bullion traders say demand for physical gold is holding up. Josh Saul, chief executive officer of The Pure Gold Company, said: "Our clients are looking for a good price to buy gold. We are seeing an unprecedented amount of people allocating more than 30% of their portfolio to physical gold.
"We always suggest that customers use gold as a hedge, investing only some of their wealth (up to 15 or 20%) in gold rather than putting all their eggs in one basket."
Elsewhere, the Comex silver contract for May delivery was down 0.59% or 11 cents to $18.17 an ounce, while spot platinum was down 0.72% or $6.98 to $968.82 an ounce.
Meanwhile, oil futures remained on negative turf, as the West Texas Intermediate (WTI) lost 0.76% or 40 cents to $52.01 per barrel, holding firm above the psychologically important $50 level, while Brent was down 0.78% or 43 cents to $54.46 per barrel.
The market continues to speculate that the Opec and non-Opec producers' historic agreement – the first of its kind in 15 years – inked by both sets of producers in December 2016, would be extended.
It was designed to take almost 1.8m barrels per day (bpd) of crude oil production offline and is due to expire towards the end of June, with Opec Secretary General Mohammad Barkindo telling a conference in Abu Dhabi: "We are optimistic the policy measures have already placed us on the path of recovery. Our collective action will continue to prove effective."
Meanwhile, US Energy Information Administration has reported a 1m barrel draw in crude inventories for the week to 14 April. At 532.3m barrels, crude oil inventories were near the upper limit of what is typical for the season, despite refineries returning to higher runs after maintenance season.
Overnight, the American Petroleum Institute estimated US commercial oil inventories had fallen by 840,000, but gasoline inventories had gone up by 1.37m barrels.
FXTM research analyst Lukman Otunuga said government reports of US shale ramping up output sharply in May fuelled the selloff, as bears exploited the concerns over excessive supply in the global markets.
"Oil oversupply woes may remain a critical theme which limits how far prices appreciate in the medium- to longer-term."