Gold prices fell for a second session on Wednesday as physical demand remained muted and as the US dollar picked up additional strength against the euro. Market participants were focused on upcoming Fed and Davos World Economic Forum statements.
Metals prices received further lift this morning as turmoil in Europe diverted funds in their direction but the complex was still competing with what is apparently shaping up as a stock market rally of notable proportions on both sides of the Atlantic.
The second central bank currency market intervention in as many months sent the US dollar soaring and gold reeling overnight as market players rushed for various entry and exit doors to take advantage of the overt move.
Spot gold prices again drifted lower in London after rising in Asia Friday morning, heading for the biggest monthly drop against the dollar since the Lehman crash of October 2008 but finishing the third quarter of 2011 more than 13% higher.
The overnight dip to the $1,580s did however attract a sufficient amount of bargain-hunting buyers to bring the yellow metal back to above the $1,600 mark by Thursday morning's opening bell in New York.
Well, the Fed left the wet rabbit of liquidity at rest in the top hat yesterday, and, boy, did the markets throw a tantrum about that! Pretty much everyone ducked pretty much anything they had bought before.
Volatility continued in unabated fashion in the precious metals markets overnight as gold and silver each gave up more than 2% in value on the heels of a firming US dollar. Thursday's gains in gold largely evaporated.
Gold regained half of Wednesday's $60 loss overnight as overseas traders tentatively entered the market in the hope that short-term gains were in the cards. Spot New York dealings opened with a rise of $32 in gold and a 70-cent gain in silver.