Gold prices fell on Wednesday, a day after scaling over seven-year highs, as the dollar firmed and investors booked profits, although concerns of a global recession put a floor under prices.
Spot gold fell 0.7% to $1,716.40 per ounce, by 11:29 am (1529 GMT). On Tuesday, prices had jumped as much as 1.9% to their highest since November 2012 at $1,746.50.
US gold futures dropped 1.5% to $1,742.80.
"Gold has been following equity markets, and equities are selling off. That's causing volatility and along with a stronger US dollar, it's getting folks to adjust their portfolios in response," said Bart Melek, head of commodity strategies at TD Securities.
Global stocks fell as oil prices dropped and warnings of the worst global recession since the 1930s underscored the economic damage done by the new coronavirus.
"Before gold can really take off and have the big macro and central bank policy measures bring it up to our view of $2,000, there has to be some stability, because anytime there is a need to get cash and liquidity, gold is going to be sideswiped by that," Melek added.
Countries and central banks across the world have stepped up measures to combat the global heath crisis, which has infected over 2 million people and killed 131,100.
In the latest move to cushion its economy, China cut a key medium-term interest rate to record lows, paving the way for a similar reduction in benchmark loan rates.
Despite the decline in prices on Wednesday, Commerzbank analyst Carsten Fritsch believes gold could cost $1,800 per ounce at year's end.
"The severe impact of the global lockdown on economies and financial markets, the flood of money released by central banks and governments and the ballooning sovereign debt point to ongoing robust demand for gold as a safe haven and last-resort lifeline."
Silver was down 2.5% at $15.42, while platinum rose 0.6% to $779.41.
Palladium dipped 1.5% to $2,184.97 per ounce.
"We continue to expect the palladium market to be undersupplied this year and next year, despite latest industry expectations for auto sales to plummet by at least 14%," Standard Chartered Bank analysts said in a note.
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