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Gold prices slipped on Wednesday as the dollar rebounded after robust U.S. manufacturing data bolstered hopes of a swift global economic recovery, rubbing some of the allure off safe-haven bullion.

Spot gold fell 0.4% to $1,962.63 an ounce by 0502 GMT, after hitting $1,991.91 on Tuesday, its highest since August 19.

U.S. gold futures dropped 0.5% to $1,969.

“A stronger greenback is weighing on the precious metal,” said Margaret Yang, a strategist with DailyFx, which covers currency, commodity and index trading community.

“The broader picture is still in favor of gold, as the U.S. Federal Reserve and other central banks are likely to stay accommodative for an extended period of time.”

The dollar index bounced off two-year lows after U.S. data showed manufacturing activity accelerated to a near two-year high in August. A stronger greenback makes gold expensive for holders of other currencies.

The firm manufacturing activity also boosted investor appetite for riskier assets, limiting inflows into safe-haven bullion.

However, expectations that U.S. interest rates would stay low for longer under the new monetary policy approach from the Fed put a floor under bullion prices.

Fed Governor Lael Brainard on Tuesday said the U.S. central bank would need to roll out more stimulus to fulfill its new promise of stronger job growth and higher inflation.

“With the central bank still cautious about the U.S. economic outlook, the Fed will most likely keep rates near zero for a long time,” Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note.

Low interest rates reduce the opportunity cost of holding non-yielding bullion, which is also viewed as a hedge against inflation and currency debasement.

Spot gold may fall to $1,938, following its failure to break a resistance at $1,996 per ounce, said Reuters technical analysts Wang Tao.

Elsewhere, silver dipped 0.7% to $27.96 per ounce, platinum slipped 0.7% to $933.88, and palladium fell 0.5% to $2,259.52.

Reference: CNBC