Gold prices edged lower in volatile trade on Wednesday as a flight to cash offset growing hopes for a massive US economic stimulus to stem the coronavirus outbreak's economic toll.
Spot gold fell 0.3% to $1,605.45 per ounce by 0447 GMT, after rising as much as 1.6% earlier in the day. The metal jumped more than 3% in the previous session.
US gold futures climbed 0.5% to $1,668.60.
"The recent development in gold prices has nothing to do with fundamentals, it (the metal) has de-linked from its safe-haven status... We are in unprecedented times and nothing can be justified," said CMC Markets analyst Margaret Yang Yan.
"Investor sentiment remains very fragile and cautious, and 'cash is king' is still on top of people's mind, so the volatility is likely to persist," she said, adding that there was some shortage of physical supply to fulfil the futures market's obligations.
Benchmark spot gold prices continued to trade below US gold futures in a sign that the market is worried air travel restrictions and precious metal refinery closures will hamper shipments of bullion to the United States to meet contractual requirements.
Senior US Democrats and Republicans said on Tuesday they were close to a deal on a $2 trillion stimulus package to limit the pandemic's economic toll.
"Gold has benefited from the expectation of the massive stimulus measures likely to be approved by the United States.
Investors feel gold might hold its value," said John Sharma, an economist at National Australia Bank.
However, investors were in two minds - whether to go for the safety of gold or liquidate positions to cover loses on other commodities and seek refuge in hard cash, he added.
The virus had infected more than 395,500 people across the world by Tuesday, and has forced many countries to lock down their cities to combat the spread.
Indicating investors' appetite for gold, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 1.3% to 935.98 tonnes on Tuesday.
Among other precious metals, palladium climbed 0.1% to $1,934.50 per ounce and platinum gained 2.5% to $725.86.
Both the metals surged more than 10% in the previous session on the back of a lockdown in major producer South Africa.
Silver rose 0.3% to $14.31 per ounce.