SYDNEY- Gold hurtled to record peaks on Tuesday before the sheer scale of its gains drew a burst of profit taking, which lifted the dollar from two-year lows and curbed early equity gains.
The precious metal had stormed almost $40 higher at one point to reach $1,980 an ounce, only for a wave of selling to slap it back to $1,947 in wild trade.
Gold is still up over $130 in little more than a week as investors wager the Federal Reserve will reaffirm its super-easy policies at a policy meeting this week, and perhaps signal a tolerance for higher inflation in the long run.
“Fed officials have made clear that they will be making their forward guidance more dovish and outcome-based soon,” wrote analysts at TD Securities.
“The chairman is likely to continue the process of prepping markets for changes when he speaks at his press conference.”
One shift could be to average inflation targeting, which would see the Fed aim to push inflation above its 2 percent target to make up for years of under-shooting.
The pullback in gold took some steam out of stocks but MSCI’s broadest index of Asia-Pacific shares outside Japan was still up 0.8 percent.
Japan’s Nikkei firmed 0.3 percent even as the yen held recent gains, while Chinese blue chips put on 0.6 percent.
E-Mini futures for the S&P 500 edged up 0.1 percent, while EUROSTOXX 50 futures added 0.4 percent and FTSE futures 0.4 percent.
The Dow had ended Monday up 0.43 percent, while the S&P 500 gained 0.74 percent and the Nasdaq 1.67 percent.
That rise was again led by technology stocks as investors wagered on upbeat earnings reports due this week. Analysts also noted the falling dollar was a positive given that more than 40 percent of S&P 500 earnings come from abroad.