Spot gold dropped below the $1,800/oz mark for the first time since late November, down 2.5% to $1,787.95/oz by 11:30 a.m. EST. US gold futures also declined 2.5% to $1,788.60/oz in New York.

Meanwhile, gold’s sister metal silver also retreated – falling 2.9% to $26.13/oz – with the market facing correction following the Reddit-fueled retail buying frenzy that sent prices to an 8-year high earlier this week.

“This flight into silver by some retail investors has been an excessive move to the upside, which is now corrected to normal fundamental-supported levels,” Quantitative Commodity Research analyst Peter Fertig told Reuters.

“Gold is also under pressure from the technical side,” said Commerzbank analyst Daniel Briesemann. “It dropped below the 200-day moving average, which triggered technical follow-up selling.”

Stronger dollar, yields
Making bullion more expensive for those holding other currencies, the dollar scaled a two-month peak, while 10-year Treasury yields rose to a three-week high.

Gold is considered a hedge against inflation from large stimulus measures, but higher yields challenge that status because they increase the opportunity cost of holding non-yielding bullion.

Investors are also focused on the $1.9 trillion US coronavirus aid plan passed by the US House without Republican support.

“The biggest risk to gold is stronger recovery as vaccines roll out, to the extent that we see US bond yields rally,” said Lachlan Shaw, National Australia Bank’s head of commodity research.

“However prices could remain supported if the rollout faces uncertainty because of emerging virus variants.”

ETF inflows
After ending 2020 with two consecutive months of outflows, gold-backed ETFs once again saw inflows ($1 billion, or 13.8t) during the month of January, according to new data released Thursday by the World Gold Council.

Global AUM for gold ETFs now stands at $226 billion (3,765t), just 4% shy of the intra-month record set in November 2020 ($244 billion).

Buying into ETFs was a major factor in gold’s strong performance in 2020, with WGC data showing a massive 120% surge in inflows to 877.1t for the year.