Gold prices fell on Wednesday as investor appetite for riskier assets such as equities and crude oil recovered slightly, denting demand for bullion, often considered a safe haven. A rally in Boeing's shares helped the Dow Jones industrial average reverse course in the early afternoon session, and crude oil pared some losses after bullish data from the US department of energy.
Spot gold fell 0.6 percent to $1,265.75 an ounce by 3:05 pm EDT (1905 GMT). In the previous session, it hit $1276.67, its highest since October 5. US gold futures settled 0.5 percent lower at $1266.60. Earlier in the session, gold was stronger as disappointing results and forecasts from major US companies continued to weigh on the European and Asian stocks. Mixed results from Europe's banking sector and declines in mining and energy shares pushed the pan-European STOXX 600 index down 0.38 percent.
"In the afternoon, equity markets bounced back sharply once the US session got underway while safe haven gold started to drift lower again," Fawad Razaqzada, market analyst for forex.com, said in a note. "It is not unheard of for gold and dollar to go in the same direction of course and there is an element of safe-haven flows propping up precious metals, especially ahead of US elections," Razaqzada said.
Uncertainty around the US presidential election on November 8 and potential Federal Reserve rate increases could have a push-pull effect on gold prices, analysts have said. Also likely to bolster gold was a pick-up in demand ahead of Indian festivals this month such as Dhanteras and Diwali, a time when gold is traditionally given as a gift as well as the Indian wedding season.
"A recovery in physical demand provided the foundation for the rally that carried over into later trading," HSBC analyst James Steel said in a note. Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.34 percent to 956.83 tonnes on Tuesday from 953.56 tonnes on Monday. In other precious metals, platinum fell 0.5 percent to $958.40 an ounce after an intraday high of $970.80, the strongest since October 10. Silver shed 1 percent to $17.63 an ounce, while palladium fell 2.3 percent to $618.50.
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