Gold fell on Wednesday as the dollar strengthened after US President Donald Trump grabbed an early lead in the key state of Florida, muddying the path for his Democratic rival Joe Biden.

Spot gold fell 0.6 per cent to $1,896.44 per ounce by 0358 GMT, having earlier shed as much as 1 per cent. US gold futures fell 0.7 per cent to $1,897.10.

“The market is losing confidence in a clear run to a Biden victory at the moment ... We have seen the Biden trade unwind and a big effect of that is that we have seen the dollar strengthen,” said IG Markets analyst Kyle Rodda.

Trump was leading Biden in the vital battleground state of Florida on Tuesday, while other competitive swing states that will help decide the election, including North Carolina, remained up in the air.

Investors were initially limbering up for a win for Biden, who was expected to inject the market with potentially large stimulus measures to help weather the economic fallout from the COVID-19 pandemic.

“I think the odds of a clean sweep are diminishing, almost by the minute. That reduces the possibility, or the likelihood at least, of a large stimulus program being agreed to in the first days of a Biden administration,” said Matt Sherwood, head of investment strategy at Perpetual in Sydney.

Gold has gained about 25 per cent so far this year on the back of unprecedented global stimulus amid the COVID-19 pandemic since bullion is considered an inflation hedge.

The dollar was up 0.7 per cent against a basket of major currencies.

“Gold has faded ahead of resistance at $1,912 and is suffering as it appears Trump will hold the key swing state of Florida,” said Jeffrey Halley, senior market analyst at OANDA, predicting a “choppy $1,890 to $1,920 range” in the morning session.

Silver fell 1.6 per cent to $23.77. Platinum dropped 0.9 per cent to $858.77 and palladium was down 0.4 per cent at $2,274.83.

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