Gold edged lower on Wednesday, reversing course from a 3 per cent surge in the previous session following a surprise rate cut by the US Federal Reserve as equities and the
dollar regained some ground.
Spot gold slipped 0.2 per cent to $1,636.13 per ounce as of 0838 GMT, having risen as much as 0.7 per cent earlier in the session and registered its biggest one-day percentage gain since 2016 on Tuesday.
US gold futures slipped 0.4 per cent to $1,637.20 per ounce.
"In the very short term, gold has perhaps reached its upside limit as this rate cut is priced in," CMC Markets analyst Margaret Yang Yan said.
A broad uptick in risk-on sentiment and a rebound in the dollar index are weighing on gold, she added.
The US stock futures rose over 1 per cent and European shares inched up, recovering from weakness in global equities earlier as the emergency cut from the Fed seemed to stoke rather than soothe fears over the virus' widening economic fallout.
The dollar also inched up from a two-month low touched on Tuesday.
The Fed trimmed interest rates by 50 basis points on Tuesday in an emergency move, its first cut outside of a regularly scheduled policy meeting since 2008.
Equity markets may be viewing the rate cuts as a positive catalyst now, unlike during the US session, CMC's Yan said.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Investors awaited the release of the US ISM non-manufacturing PMI data and the Fed's Beige Book of economic condition later in the day.
The gold market has discounted the fact that any data will come on the lower side and any impact from the ISM numbers will be temporary, said Jigar Trivedi, a commodities analyst at Anand Rathi Shares and Stock Brokers in Mumbai.
On the technical front, the immediate support is around $1,630 an ounce while the resistance lays around $1,660, he added.
Elsewhere, palladium fell 2.1 per cent to $2,449.03 per ounce, while platinum was up 0.1 per cent at $875.99.
Silver gained 0.1 per cent to $17.19 an ounce.
Demand for platinum from the auto industry will rise this year for the first time since 2016 but it won't be enough to offset a decline in investment buying, leaving the global market in surplus again, the World Platinum Investment Council said.