Gold slipped below $1,350 an ounce on Tuesday after the previous day's rally towards a recent two-year high ran out of steam, though prices were supported by continued uncertainty following Britain's vote to leave the European Union. The Brexit vote sent gold to its highest since early 2014 on June 24. While concerns about global growth and monetary policy continued to support gold it has failed to match that since.
Spot gold was down 0.2 percent at $1,347.90 an ounce at 1330 GMT. "There is some profit taking coming in," Mitsubishi analyst Jonathan Butler said. "We've seen gross long positions in gold reach record highs and clearly many investors are in a position to take profit. We're some $100 above where we were in the middle of last month."
Elevated risk aversion will likely continue to support gold prices, however, he said. European shares fell 1.4 percent as nervous investors cashed in gains after a four-day winning streak ended on Monday, despite hopes of increased central bank stimulus to offset a likely downturn triggered by Brexit. The Japanese yen rose almost 1 percent against the euro and dollar while sterling hit its lowest since the aftermath of the Brexit vote.
"The market is extremely nervous," said Afshin Nabavi, head of trading at MKS. "That's why gold and silver are benefiting." US gold futures for August delivery were up $11.80 an ounce at $1,350.80. US markets were closed on Monday for the Independence Day holiday. Silver was 2.4 percent lower at $19.80 an ounce, having jumped above $21 an ounce for the first time in two years in the previous session.
It posted its biggest weekly gain in nearly three years following the Brexit referendum, hitting its most expensive relative to gold since September 2014. "Silver had soared by nearly 19 percent at its peak since the beginning of last week without there having been any news to justify such a pronounced price rise," Commerzbank said in a note. "Evidently speculative financial investors played a major part in the price increase." "In our opinion, there is now considerable correction potential from this side. If the 'hot air' were to dissipate, the silver price could come under more significant pressure." Platinum was up 0.1 percent at $1,066 an ounce, while palladium, which had fallen more than 4 percent earlier, was down 1.6 percent at $603.90.
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