Gold fell on Wednesday after hitting record highs on growing fears of a US default, as technical weakness, a rallying dollar and a broad sell-off of riskier assets prompted bullion investors to take profits. Gold volatility rose as trading volume hit its highest since January and marked the second-heaviest trading day of the year, after option investors exercised a large number of in-the-money $1,600 calls at Tuesday's option expiry.
In early trade, gold rose as the fate of Republican and Democratic deficit-reduction plans remained heavily in doubt as top lawmakers pursued a behind-the-scenes compromise to avert a crippling US debt default. Spot gold was down 0.4 percent at $1,613.05 by 2:53 pm EDT (1853 GMT), after rallying to a record $1,628 an ounce. US gold futures for August delivery settled down $1.70 an ounce at $1,615.10, after trading between $1,608.90 and $1,628.80. Silver lost 1.5 percent at $40.23 an ounce.
By 3:30 pm EDT, US gold futures trading volume had topped 380,000 lots, the second-highest this year after the 2011 peak of about 410,000 lots set on January 27. Platinum was up 0.1 percent at $1,803 an ounce, and palladium eased 0.4 percent at $828.97 an ounce.