Gold rebounded after the biggest drop in more than a year as investors reminded themselves of a world that’s beset by risk, from the prospect of further currency weakness to the final stretch of the U.S. presidential election.
Spot gold climbed as much as 0.5 percent to $1,275.28 an ounce and traded at $1,272.40 at 2:53 p.m. in Singapore.
Prices tumbled 3.3 percent on Tuesday, the most since July 2015, as prospects for higher U.S. rates and less stimulus in Europe spurred a selloff.
“It’s a buying opportunity,” Bob Takai, chief executive officer and president of Sumitomo Corp. Global Research Co., 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 favored.”
After a blistering first half when central bank accommodation and Britain’s Brexit vote lifted gold, prices have come under pressure as Federal Reserve policy makers talk up the outlook for higher borrowing costs and there’s speculation that the European Central Bank may taper stimulus. Gold may bounce back given the risks from the U.S. election to Britain starting talks to leave the European Union, according to Oversea-Chinese Banking Corp., which also highlighted lackluster inflationary pressures.
“As quickly as gold fell, as quickly gold could rally back,” said 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,” Gan said in a report on Wednesday.
While prices sank on Tuesday, pummeling miners’ shares, global holdings in exchange-traded products expanded. The assets rose 0.2 percent to 2,036.5 metric tons, according to data compiled. That’s near the peak of 2,039.9 tons reached on Aug. 11, which was the highest since 2013.
Miners fell on Wednesday. Newcrest Mining Ltd., Australia’s top producer, lost 5.1 percent in Sydney to the lowest since Sept. 16, while Evolution Mining Ltd. sank 7.9 percent. In Hong Kong, Zijin Mining Group Co. slid.
While some further downward pressure is still expected from a Hillary Clinton victory in November 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 $1,400 next year, it said.