After surging about 30 per cent this year, gold’s rally came to a sudden halt Tuesday as U.S. bond yields rose, cutting into the negative real rates that had supported the metal. A measure of gold volatility over the past month jumped to the highest since April. U.S. equities traded higher on Wednesday, with the S&P 500 edging toward a record, helping limit gains for bullion.

Gold is still one of the best-performing commodities of 2020 after the coronavirus outbreak pummeled the global economy, prompting central banks and governments to deploy massive stimulus. While a host of catalysts including geopolitical tensions and the threat of COVID-19 outbreaks are expected to continue to underpin demand for bullion as a haven, the metal may take time to regain momentum with investors spooked by the rout, according to Commerzbank AG.

“The impressive summer rally enjoyed by gold and silver came to an explosive end yesterday,” Commerzbank analyst Carsten Fritsch said in a note. “We are unlikely to see prices return quickly to the highs they achieved at the end of last week. Yesterday’s sell-off caused too much technical damage for this to happen, frightening investors off in the process.”

Spot gold rose 1.3 per cent to US$1,936.49 an ounce at 1:46 p.m. in New York, after falling as much as 2.5 per cent. On Tuesday, the spot prices dropped 5.7 per cent, the biggest one-day loss in seven years. Gold futures for December delivery advanced 0.1 per cent to settle at US$1,949 on the Comex in New York on Wednesday.

Silver for immediate delivery jumped 4.2 per cent to US$25.8543 an ounce. That came a day after the white metal tumbled 15 per cent, while silver futures on the Comex fell 11 per cent in record volume.

Benchmark Treasury yields have climbed more than 10 basis points so far this month amid improving risk appetite and an imminent flood of debt issuance. The recent rebound reflects investor hopes that the coronavirus will be contained, according to Standard Chartered Plc.

Still, U.S. consumer prices excluding volatile food and fuel costs rose the most in about three decades in July, topping estimates, a report Wednesday showed. Expectations for rising inflation have underpinned the metal’s climb in recent weeks.

“The U.S. CPI number released today has helped the gold price to restore some of its shine,” Naeem Aslam, chief market analyst at Ava Trade, said by email Wednesday. “There is still a huge opportunity here.”

Gold’s still got plenty of high-profile supporters. Among banks that have forecast substantial gains in recent weeks, Bank of America Corp. predicted that prices will hit US$3,000. Saxo Bank A/S said the sharp correction doesn’t signal the end of gold’s run, and DoubleLine Capital LP’s Jeffrey Gundlach said that he expects the metal to keep trading higher despite the setback.

“Expectations of a V-shaped recovery from the coronavirus lockdowns remain far-fetched,” Avtar Sandu, senior manager for commodities at broker Phillip Futures in Singapore, said in a note. “The long-term fundamental drivers of gold remain positive in outlook. However, in the short run, gold prices seem to be reacting to headline news events and the technical picture has projected some consolidation ahead.”