US stocks retreated on Wednesday from record levels on the halting progress of economic stimulus talks, while gold fell more than 2% due to optimism over incoming COVID-19 vaccines.
Major averages on Wall Street touched record levels on Tuesday while gold prices rose to a two-week peak, buoyed by growing expectations of more US fiscal stimulus.
Nickel and gold miner IGO Ltd went into trading halt before announcing that it would take a 25% stake in Greenbushes lithium mine from China's Tianqi for $1.4 billion.
Energy stocks, on the other hand, saw their worst day in a week as oil prices fell on surging coronavirus cases in the United States and Europe and tightening of lockdowns to tackle them.
On the upside, the gold sub-index gained as much as 2.8%, after expectations of fresh fiscal stimulus in the United States pushed prices up 1% on Monday.
Dalian iron ore hit a record high on Friday, boosted by robust demand in China and supply concerns fuelled by disappointing forecasts by Brazilian miner Vale SA.
There is still a high degree of uncertainty about the outlook, said Reserve Bank Governor Philip Lowe, adding that the economic recovery is underway, but will be "uneven and bumpy".
The drop follows China's unofficial ban on Australian imports ranging from coal to copper ores and barley, amid souring relations between Beijing and Canberra.
Equity markets, especially pro-cyclical ones such as Australia, are expected to be outperformed by gold, the US dollar, and the US treasuries, he added.
The fears dragged global oil prices, with Beach Energy and Oil Search leading the declines among Australia's energy stocks. Top gas producer Woodside Petroleum fell 2pc.
Reserve Bank of Australia (RBA) Governor Philip Lowe on Tuesday urged the government to borrow more and boost public spending to support the country's economic recovery.
Denting sentiment further, Australia said it will run record budget deficits this year and next following spends on a big stimulus and infrastructure to aid its economic recovery.