(Jan 30): Gold fell the most since October, reversing earlier gains that took the precious metal to a fresh record above US$5,500 an ounce, as the US dollar strengthened.
A rebound in the greenback helped drive down bullion by as much as 5.7% in the biggest intraday drop since Oct 21, before paring some of the losses. Silver dropped as much as 8.4%. A gauge of the dollar rose as much as 0.3%, reversing earlier declines.
Gold has advanced sharply this year with heightened geopolitical tensions and worries about the independence the Federal Reserve, which have supported the debasement trade. The precious metal had climbed more than 20% just this month, with some technical indicators pointing to a near-term price correction.
“Given the frothiness in the markets and the dominance of flows over fundamentals, it does not need much for a correction,” said Julius Baer Group Ltd’s Carsten Menke.
Gold’s relative strength index spiked above 90 and silver’s was around 84. Readings above 70 typically signal the metal has been bought so heavily it could be due for a pause or pullback.
Declines in the equities market also sparked a liquidation in other assets, including precious and industrial metals, according to Phil Streible, chief market strategist at Blue Line Futures.
See also: Gold is soaring. Can it ever get too high?
Spot gold fell 2.6% to US$5,276.46 an ounce as of 11.25am in New York. Spot silver fell 3.6% to US$112.44 an ounce.
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