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Gold prices fell on Wednesday, after a steep rise in the previous session, as a flight to cash offset optimism around the US government agreeing on a massive stimulus package to ease the economic burden of the coronavirus pandemic.
In volatile trade, spot gold fell 1% to $1,594.18 per ounce by 0743 GMT, after rising as much as 1.6% earlier in the day. The metal jumped more than 3% on Tuesday.
US gold futures climbed 0.2% to $1,664.80.
"The recent development in gold prices has nothing to do with fundamentals, it (the metal) has de-linked from its safe-haven status... We are in unprecedented times and nothing can be justified," said CMC Markets analyst Margaret Yang Yan.
"Investor sentiment remains very fragile and cautious, and 'cash is king' is still on top of people's mind, so the volatility is likely to persist," she said, adding that there was some shortage of physical supply to fulfil the futures market's obligations.
Benchmark spot gold prices continued to trade below US gold futures in a sign that the market is worried air travel restrictions and precious metal refinery closures will hamper shipments of bullion to the United States to meet contractual requirements.
Investors were in two minds — whether to go for the safety of gold or liquidate positions to cover losses on other commodities and seek refuge in hard cash, said John Sharma, an economist at National Australia Bank, adding that initial expectations for the U.S. stimulus package had supported gold.
US Senate majority leader Mitch McConnell said the fiscal stimulus package, expected to be worth $2 trillion, had been agreed upon and would be put to a vote later on Wednesday.
The virus had infected nearly 421,000 people across the world by Wednesday, and has forced widespread lockdowns to combat the spread.
Indicating investors' appetite for gold, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 1.3% to 935.98 tonnes on Tuesday.
Among other precious metals, palladium climbed 1.9% to $1,968.80 per ounce, while platinum gained 2.6% to $726.61.
Both the metals surged more than 10% in the previous session on the back of a lockdown in major producer South Africa.
Silver rose 0.8% to $14.38 per ounce.
The unanimous vote came despite misgivings on both sides about whether it goes too far or not far enough and capped days of difficult negotiations as Washington confronted a national challenge unlike it has ever faced. The 880-page measure is the largest economic relief bill in US history.
It aims to cushion the economic blow from a pandemic that has killed more than 660 people in the United States and sickened more than 50,000, shuttered thousands of businesses, thrown millions out of work and led states to order 100 million people to stay at home.
The global aviation industry has been hammered by the pandemic, as it is directly affected by border closures and population lockdowns.
Days after the Reserve Bank of India (RBI) said that India’s GDP growth for the financial year 2020-21 may remain in the negative territory, CRISIL has projected that the country’s economy contract by 5 per cent this fiscal, downgrade from its previous estimate of 1.8 per cent growth.
The Sharjah Chamber of Commerce & Industry (SCCI), stated that it has issued 4,527 electronic Certificates of Origin in March and April, while the total number of memberships until the end of April reached 1,215.
FTA has issued a decision to postpone the implementation of the ban on supplying, transferring, storing, and possession of water pipe tobacco and electrically heated cigarettes in the UAE that do not carry digital tax stamps until Jan.1, 2021.