Gold prices hovered just below $1,380 an ounce Wednesday morning in London, with silver trading around $21.80, after the metals failed to break through $1,380 and $22 respectively.
European stock markets ticked higher by lunchtime – with the exception of Germany's DAX – regaining some of yesterday's losses, which were followed by sell offs in the U.S. and Asia.
Commodities ticked higher this morning while U.S. Treasury bond prices fell ahead of an auction of 10-year debt later today.
"The gold price is unable to recover despite a weaker U.S. Dollar and falling equity markets," says this morning commodities note from Commerzbank. "The dominant subject on the gold market continues to be the possibility of a premature withdrawal of bond purchases by the U.S. Federal Reserve...in our view, the figures available so far do not constitute any reason to scale back QE3 in the near future."
"There's a tug of war between investors putting money into gold and taking it out," adds Bernard Sin, head of currency and metal trading at Swiss refiner MKS, who also cited concerns among investors "worried about is if there's no more quantitative easing."
"With the Chinese out [on holiday] until Thursday," adds a note from ANZ, "the [gold] market is lacking a key stabilizing factor."
Since falling sharply in April, gold has swung either side of $1,400 an ounce, with the gold price falling as low as $1,337 and as high as $1,478. Silver has also oscillated, while stock markets have retreated after hitting multi-year, or in some cases record highs last month, with Japan's Nikkei especially hard hit.
"We think the recent volatility can be mostly traced to [Fed] Chairman Bernanke's rather unconvincing testimony in front of Congress a few weeks ago when he failed to clarify exactly when the Federal Reserve's bond buying program will be pared back," says a note from INTL FCStone metals analyst Ed Meir. "Markets have been on edge ever since, with the global bond market in particular getting hammered."
An auction of 10-year U.S. Treasury bonds later today is set to see benchmark yields above the inflation rate for the first time in 18 months, the Financial Times reports.