Gold fell more than 2 percent on Wednesday, the biggest daily drop since its historic decline in mid-April, as investors sold off a range of commodities, and caution prevailed ahead of a policy statement by the Federal Reserve. Silver dropped 4 percent and platinum group metals fell 2 percent, tracking sharp losses in industrial commodities led by crude oil and copper.
Signs of slowing manufacturing growth both in the United States and China weighed down on demand hopes for industrial commodities and hit gold's inflation-hedge appeal. Investor jitters ahead of the Federal Open Market Committee's comments about the US monetary outlook also triggered some bullion selling, traders said. Still, bullion has recovered more than half the $225-per-ounce loss it incurred between April 12 and 16, driven by strong physical demand around the world especially in top bullion consumers China and India.
"Some of those out-of-control retail buying has now been satisfied," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC. Physical buying also slowed down due to holidays in China and parts of Europe due to the Labour Day holiday. Spot gold fell 2.2 percent to $1,444.36 an ounce by 11:31 am EDT (1531 GMT), on track for its biggest one-day drop since April 15 when it lost 8.5 percent.
US Comex gold futures for June delivery were down $28.40 to $1,443.70 an ounce Turnover was light given gold's sharp sell-off. Trading volume at 11:31 am was less than 115,000 lots, on track to finish below the 30-day average at 232,300, preliminary Reuters data showed. Gold's near-term outlook will depend on the Fed's monetary outlook, due at 2 pm EDT (1800 GMT).
The Federal Reserve's debate over US monetary policy could begin to shift away from the prospect of reducing stimulus toward a discussion about increasing it, given signs of economic weakness and slowing inflation. Among other precious metals, silver fell 4 percent to $23.32 an ounce. Platinum dropped 2.1 percent to $1,471.99 an ounce, while palladium was also down 2.1 percent to $679.47.
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