Gold falls again as rally comes to halt

HONG KONG

Gold and silver sank for a second day on Wednesday, bringing a rally in the precious metals to a juddering halt.

Bullion has seen an eye-watering run-up since the turn of the year, helping it climb more than 60 percent and hitting multiple records, with observers suggesting it could soon hit $5,000 an ounce.

The rally has been built on a range of issues including a weaker dollar, expectations of interest rate cuts, falling bond yields and central bank buying.

But the buying reversed on Oct. 21, tanking as much as six percent at one point, and continued its retreat in Asia, hit by profit-taking, hopes for a further easing of China-U.S. tensions and a stronger dollar.

At one point yesterday it hit a low of $4,000, a day after chalking up a record peak of $4.381.51. Silver, which has been riding the coattails of the rally, also plunged.

"Gold's glorious charge finally met gravity. After months of one-way conviction and relentless inflows, the metal took a six-percent cliff dive," said Stephen Innes at SPI Asset Management.

"Volatility in gold has now surpassed equities, echoing the pandemic's manic heartbeat," he said.

However, he added that the commodity would likely still retain support among investors.

"Beneath the surface, the structural demand for insurance remains. Central banks will keep stacking reserves, investors still question the durability of fiat promises, and the monetary plumbing remains swollen with debt and distortion, he said.

Charu Chanana of Saxo Markets added: "None of this means the precious metals story is over. In fact, these are healthy developments, helping to cool what had become an overheated trade and preventing the rallies from turning into a bubble."