Gold rebounded after the biggest drop in more than a year as investors reminded themselves of a world that is beset by risk, from the prospect of further currency weakness to the final stretch of the United States presidential election.
Spot gold climbed as much as 0.5 per cent to US$1,275.28 an ounce and traded at US$1,272.40 at 2.53pm in Singapore, according to Bloomberg's generic pricing.
Prices tumbled 3.3 per cent on Tuesday, the most since July last year, as prospects for higher US rates and less stimulus in Europe spurred a sell-off.
"It's a buying opportunity," Mr Bob Takai, chief executive officer and president of Sumitomo Corp Global Research, said from Tokyo. Uncertainty about "the European currency, uncertainty about the sterling pound - all these things point to the direction that gold is going to be favoured".
After a blistering first half when central bank accommodation and Britain's Brexit vote lifted gold, prices have come under pressure as US Federal Reserve policymakers talked up the outlook for higher borrowing costs. Added to this was speculation that the European Central Bank may taper stimulus.
Gold may bounce back, given the risks from the US election to Britain starting talks to leave the European Union, according to OCBC, which also highlighted lacklustre inflationary pressures.
"As quickly as gold fell, it could rally back as quickly," said Mr Barnabas Gan, an economist at OCBC and the most accurate forecaster of the metal in the third quarter, according to data compiled by Bloomberg. "Weak inflationary pressures may once again lift gold," Mr Gan said in a report yesterday.
While prices sank on Tuesday, pummelling miners' shares, global holdings in exchange-traded products expanded.
The assets rose 0.2 per cent to 2,036.5 metric tonnes, according to data compiled by Bloomberg. That was near the peak of 2,039.9 tonnes reached on Aug 11, which was the highest since 2013.
Shares in mining industry fell.
Newcrest Mining, Australia's top producer, lost 5.1 per cent in Sydney to its lowest level since Sept 16, while Evolution Mining sank 7.9 per cent.
In Hong Kong, Zijin Mining Group slid.
While some further downward pressure is still expected from a Hillary Clinton victory next month over her Republican rival Donald Trump, low real interest rates will ensure precious metals remain attractive, BMI Research said in an Oct 4 report.
Bullion may average US$1,400 next year, it said.