Gold eased slightly yesterday after a surge above US$1,500 for the first time since April 2013 in the previous session in response to trade tensions between the United States and China, as well as growing signs of an economic slowdown.
Spot gold was down 0.3 per cent at US$1,496.52 per ounce at 1015 GMT (6.15pm Singapore time). US gold futures fell 0.7 per cent to US$1,508.30 per ounce.
"Given how aggressively gold has gained in the past few days, it's only natural for prices to retrace before pushing back higher," said FXTM analyst Lukman Otunuga.
The metal has risen more than 17 per cent so far this year and about US$100 over the past week, in a stellar run propelled by trade tensions and an increasingly dovish shift in policy by central banks amid fears of slowing growth.
"The situation has not changed. Political tensions continue to exist, the trade war is still going on, so I would not be surprised to see higher prices," said Mr Afshin Nabavi, senior vice-president at precious metals trader MKS, adding that prices could move in the range of US$1,475 to US$1,530 in the absence of further catalysts.
Global stock markets enjoyed a tentative recovery following sharp falls in response to an escalation in the trade war, when China allowed the yuan to weaken beyond the key mark of 7 per US dollar, viewed as a retaliation to a US threat of additional tariffs.
"Any reconciliation signal between (US President Donald Trump) and China could send investors back to riskier assets," ActivTrades analyst Carlo Alberto De Casa said in a note.
But other factors, including a lower interest rate environment, are likely to keep safe-haven bullion supported, analysts said.
Yesterday, the Philippine central bank cut its benchmark lending rates, following similar moves by New Zealand, India and Thailand, among others.
Following the US Federal Reserve's rate cut last week, interest rate futures suggest traders are betting that the Fed will cut rates three more times by the end of this year to avert a recession.
In another tailwind for gold, US 10-year Treasury yields dropped further below three-month rates, an inversion that has reliably predicted recessions in the past.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.02 per cent to 845.42 tonnes on Wednesday.
Gold may gain further to US$1,524, as it has cleared resistance at US$1,497, said Reuters technical analyst Wang Tao.
Silver eased 0.3 per cent to US$17.06 per ounce. During the previous session, it hit its highest point in more than a year. REUTERS