Gold pulled back as traders were taking profits following the latest record surge in the yellow metal.
Gold has been driven by the continuing weakness in the US dollar, which has been under pressure from expectations of more quantitative easing (QE) from the Federal Reserve.
A new round of stimulus measures is very likely after the minutes of the latest Federal Open Market Committee (FOMC) revealed that the regulators were in favour of taking additional steps to support the slowing recovery sooner rather than later.
Today, Fed Chairman Ben Bernanke said that the government had to act to preclude a deflation and push up inflation.
Several high ranking Fed officials have recently stated that more QE was warranted as inflation was low, while the unemployment rate remained at nearly 10%.
More government purchases and money printing by the Fed would result in higher inflation and further weaken the US dollar.
Gold is seen as an inflation hedge and an alternative investment to the US dollar, usually moving inversely to the greenback.
The US dollar again declined against other major currencies today. The EUR/USD rate is approaching 1.41, while the USD/JPY rate is near 15 year lows at 81.20.
Meanwhile, China’s yuan has hit new all time highs against the US dollar amid anticipation of today’s statement from the US Treasury, which may or may not label China as a currency manipulator.
China is facing pressure from the US to allow its currency, which is widely seen as grossly undervalued, to appreciate.
The cheap yuan keeps the value of China’s goods low, giving its companies a competitive advantage in export markets.
Gold dropped to US$1,377/oz, while silver and platinum retreated to US$24.49/oz and US$1,699/oz respectively.
Major mining stocks were on the rise today. Gold producer Randgold Resources (LON:RRS) and African Barrick Gold (LON:ABG) posted small gains, as did silver miner Frensillo (LON:FRES) and platinum miner Lonmin (LON:LMI).
Midcaps followed the trend with gold miner Petropavlovsk (LON:POG) adding 1.6%, while silver producer Hochschild Mining (LON:HOC) tacked on almost 1%.
Aquarius Platinum (LON:AQP) went against the tide, shedding 3.3%.
Gold and copper focused explorer and developer Mariana Resources (LON:MARL) was among the top risers in the sector with an 11.5% gain. Solomon Islands and Australia operating copper and gold explorer Solomon Gold (LON:SOLG) and Latin America focused gold producer and exploration company Orosur Mining (LON:OMI) also did well, rising 7.5% and 6.5% respectively.