Gold extended its decline on Wednesday as growing hopes of a short-term economic recovery continue to take the momentum from safe-haven investments.
Earlier in the day, spot gold slipped 1% and fell below $1,700 to a two-week low of $1,693.90. By noon ET, it was down 0.6% at $1,701.31 per ounce. Gold futures for June delivery also dropped by 0.6% to $1,695.60.
Meanwhile, equities continued to rally despite growing political tensions between China and the US, which normally would lessen the appeal of riskier assets to investors and support bullion prices.
However, analysts still believe that the outlook remains positive for gold during these times of political and economic uncertainty.
“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,” Commerzbank analyst Eugen Weinberg said Wednesday in an interview with CNBC.
“What we saw over the preceding 24 hours was a break of relatively meaningful support at about $1,715,” DailyFx currency strategist Ilya Spivak told Reuters.
“The positive story seems to be easing of restrictions and (that) there will be some sort of rebound in economic activity … but, there is (also) a lot of negativity. Tension between the US and China is a huge risk,” Spivak added.
“The risks of a temporary short-term gold market unwind to a low- to mid-$1,600 level seems to be rising,” analysts at Citi recently said in a note, though the bank remains bullish on gold in the medium term and maintains that $2,000 an ounce will be breached in the next 12 months.