Gold futures remained below the key $1,800 mark on Wednesday, looking to stretch their losses to a second consecutive session, pressured by further strength in the U.S. dollar.
Investors awaited trading cues from the release of the Federal Reserve's Beige Book on economic conditions later Wednesday.
Sharp gains in the dollar, expectations that central banks will taper asset purchases and gold's "inability to break past $1,840 despite positive news [last week] in the form of lower U.S. August nonfarm payrolls" contributed to gold's fall below the key $1,800 mark, said Chintan Karnani, director of research at Insignia Consultants.
"This has resulted in short term traders using every rise to exit the gold investments," he told MarketWatch, adding that December gold on Comex is also trading below its 200-day moving average of $1,813.50.
December gold fell by $8.90, or 0.5%, to trade at $1,789.60 an ounce after tapping a high at $1,804.40. Prices dropped 1.9% on Tuesday -- the sharpest one-day percentage drop for a most-active contract since Aug. 9, with the move pushing the contract to the lowest settlement since Aug. 26, FactSet data show.
The dollar continued to strengthen Tuesday, weighing on gold which is traded in the greenback. The ICE U.S. Dollar Index DXY up 0.2% at 92.72.
"Trading in precious metals has really been all about economic data and what it means for Fed policy expectations," Tyler Richey, co-editor at Sevens Report Research, wrote in Wednesday's newsletter.
"To that point, gold rallied towards multi-month highs in the wake of the August jobs report, but failed to materially breakout amid concerns about a loss of economic momentum ahead of the Fed's plans to taper [quantitative easing]," he said. "Then the hawkish repositioning across asset classes, underscored by the dollar rally and rise in interest rates further weighed on gold over the course of the day."
Bottom line, "the bullish case for gold is characterized by a very fragile balance between a steady but relatively slow economic recovery (data that is too hot causes hawkish money flows) and still accommodative central bank policy, Richey explained. "So, anything that contradicts either one of those things will weigh on gold near term."
Meanwhile, weakness in benchmark bond yields, which can compete for haven flows against the yellow metal, failed to provide much support for gold. The 10-year Treasury was yielding 1.36%, compared with around 1.37% on Tuesday.
"Despite declines on riskier assets, gold has been unable to benefit from the current short-term 'risk-off' climate," wrote Pierre Veyret, technical analyst at ActivTrades, in a Wednesday note.
"Investors may want to wait for further signs of any economic slowdown before taking the decision to increase their exposure to safe havens," the analyst wrote.
Trading for gold has come against the backdrop of concerns about the delta variant of the COVID-19, which have supported price moves, and uncertainty about the Fed's monetary-policy plans, as the labor-market recovery looks uneven. The fact that easy-money policies have remained in place has helped equity markets rise repeatedly to record highs, undercutting demand for bullion, some strategist argue.
In other metals, December delivery was trading 30.8 cents, or 1.3%, lower at $24.07 an ounce, following a 1.7% drop on Tuesday.
December copper lost 0.8% to $4.25 a pound. October platinum declined by 1.9% to $977.20 an ounce and December palladium traded at $2,290.50 an ounce, down 2.7%.
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