Gold prices fell to a three-week low on Tuesday, as demand for riskier assets drove stocks higher and the dollar hit a six-week peak against the yen. "Risk appetite is back," said Societe Generale analyst Robin Bhar. Rising share prices increase the opportunity cost of holding non-yielding bullion, while a stronger dollar makes gold more expensive for holders of other currencies. Spot gold was down 0.1 percent at $1,255.43 an ounce by 2:28 pm EDT (1828 GMT), having earlier hit $1,251.37, the lowest since April 10 and around the 200-day moving average.
US gold futures settled up 0.1 percent. "The moving averages tell us objectively that the long-term trend is no longer bearish. However, gold is yet to break down its long-term bearish trend line, which again held in early April," said Fawad Razaqzada, technical analyst with Forex.com.
"As a result, we have seen a sharp unwinding of the long positions that had been accumulated since December 2016 and again in March." Gold fell 0.9 percent on Monday after US lawmakers agreed on a spending package to avert a US government shutdown and the Nasdaq share index reached a record high. Meanwhile, the market's so-called fear gauge, the VIX volatility index, fell to its lowest since 2007 on Monday. On Tuesday, world stock markets inched higher as investors awaited the outcome of a two-day US Federal Reserve policy meeting to be announced at 2 pm EDT (1800 GMT) on Wednesday.
"If the Fed signals further rate increases and shrinking of the balance sheet tomorrow and then we get a good jobs number on Friday we should certainly end the week below $1,250, and maybe closer to $1,240," said Societe Generale's Bhar. Higher interest rates would cause US bond yields to rise, making non-yielding gold less attractive. In other precious metals, silver was down 0.4 percent at $16.78 an ounce, after touching $16.75, its lowest since January 27. It has fallen for 11 out of the past 12 sessions, putting the spot price on track for the most technically oversold level on a 14-day relative strength index since November 2015.
Platinum was 0.03 percent lower at $924.70, after falling to a four-month low at $919. Palladium was down 0.2 percent at $813.25. The metal used in the automotive industry for emission-controlling catalytic converters is near a two-year high, but car sales are too weak to sustain it, said Julius Baer analyst Carsten Menke.
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