Stronger U.S. government debt returns are making gold a less-attractive investment and market participants continue to cash in on the metal's recent record rally.
The most actively traded gold contract, for February delivery, was recently down $15.70, or 1.1%, at $1,393.30 U.S. an ounce Wednesday on the Comex division of the New York Mercantile Exchange.
Gold, which doesn't earn interest, is losing some of its luster as speculation of higher economic growth and larger fiscal deficits from Bush-era tax-cut extensions fuels a rise in short-term U.S. Treasury yields. The benchmark 10-year yield earlier touched 3.253%, the highest level since June 22.
That in turn is supporting the U.S. dollar, driving gold prices even lower. A stronger dollar tends to pressure dollar-denominated gold by making it more expensive for foreign buyers. The ICE Futures U.S. Dollar Index recently was up 0.3%.
The urge to cash in on gold's $1,432.50 U.S. record, hit Tuesday, was overwhelming any support from the metal's initial rally as an inflation hedge after U.S. President Barack Obama announced a deal with Republican leaders in Congress to extend income tax cuts for two years.
