Gold falls on increased appetite for risk
London — Gold fell on Tuesday as sharper appetite for risk benefited cyclical assets at bullion’s expense, although losses were capped by the dollar’s slip to a three-week low against a basket of currencies.
Gold rallied to a two-and-a-half-month high last week as heightened tension over Syria and US sanctions on Russia sparked a drop in equities and ratcheted up interest in nominally defensive assets. Those gains, however, have proved hard to maintain.
Spot gold was down 0.2% at $1,342.40 an ounce by 9.45am GMT, while US gold futures dropped 0.4% to $1,345.20.
"All this noise we’ve been witnessing as of late, whether it is trade disputes or Syria, has not really moved gold on a sustainable basis," said Julius Baer analyst Carsten Menke. "The story would be different if these disputes prevailed and we got a significant slowdown in leading indicators. But it doesn’t seem to me that anybody is really afraid of a material deterioration in the economic backdrop."
A gradual return of risk appetite lifted world shares on Tuesday, with European stocks climbing 0.4% to erase the previous session’s losses.
The US yield curve reached its flattest in more than a decade on Monday after the White House said that US President Donald Trump would nominate Richard Clarida as US Federal Reserve vice-chairman, another hawkish voice at the central bank.
A flatter yield curve typically indicates that the Fed is planning to lift interest rates in the near term and is often understood to signal concern over the macro-economic outlook. Higher rates typically weigh on non-yielding bullion.
The euro hit a three-week high on Tuesday as solid Chinese economic data and receding fears of more US strikes in Syria revived risk sentiment, weakening the dollar. On Monday, Trump also accused Russia and China of devaluing their currencies while the US raises interest rates.
Among other precious metals, silver was up 0.1% at $16.62 an ounce and platinum rose 0.2% to $925.50.
Palladium retreated by 1.6% to $986 an ounce after hitting $1,012.10, its strongest since March 1, the previous day. It had rallied nearly 10% last week, the biggest weekly gain since January 2017, on fears that US sanctions on Russia could hurt supply of the automotive catalyst metal. Commerzbank said in a note, "Palladium has gained by $100, or 11%, since the US sanctions were announced on April 6."