Gold fell on during the U.S session, moving well below Tuesday’s all time high following a leak on news that a proposal to give Europe’s financial rescue fund new powers to fight debt contagion drew investors to riskier assets at the expense of safe havens.
Other commodities such as silver also declined by 3 percent as euro zone leaders at the emergency summit were set to give their financial rescue fund sweeping new powers to tackle the region’s debt crisis. They also signaled they were willing to let Greece default temporarily.
Gold has actually been under pressure since the New York Times reported that President Barack Obama and House Speaker John Boehner were starting to close in on a major budget deal to avert a U.S. default. The White House later said both parties were not close to a deal.
“Any kind of normalization, either economic or financial policy, is going to have an adverse effect on the gold price,” said Mark Luschini, chief investment strategist of Janney Montgomery Scott which oversees $54 billion in assets.
“However, there are still those elements of uncertainty that leave a wrinkle out there for those who are already long gold to not abandon it,” he said.
Spot gold was down 0.8 percent at $1,585.80 an ounce early in the U.S. session, around $20 below its record $1,609.51 set on Tuesday.
Meanwhile Spot silver dropped 2.9 percent to $38.82 an ounce.