Gold eased on Wednesday after the Italian government indicated it was open to trimming its budget deficit and debt, soothing investors' nerves and prompting a wider move back into stocks and other higher-risk assets. Bullion was also pressured by a stronger dollar as economic data supported the view that the US economy is strong.
Spot gold was down 0.3 percent at $1,199.56 per ounce by 1:47 p.m. EDT (1747 GMT), after it touched an over one-week high of $1,208.32 earlier in the session. US gold futures for December delivery settled down $4.10, or 0.34 percent, at $1,202.90 per ounce. Global stock markets rose, with the Dow Jones Industrial Average opening at a record high, and Italian bonds rallied after Rome pledged it would narrow budget deficits in the coming years.
"With US equities hitting record highs here, the stickiness in equity prices will continue and the dollar strength will continue to materialize with what the US Federal Reserve is doing," said David Song, a currency analyst at DailyFX.
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, while rising interest rates increase the opportunity cost of holding non-yielding bullion. Gold prices have fallen for six months, shedding some 11 percent, largely due to the dollar's strength. The greenback has benefited from a vibrant economy, rising US interest rates and fears of a global trade war.
"What the market is looking for is confirmation for underlying strength of the US economy," said Suki Cooper, precious metals analyst at Standard Chartered Bank, adding investors will now await US non-farm payrolls data on Friday. According to a Reuters survey of economists, non-farm payrolls likely increased by 185,000 in September after jumping 201,000 in August.
On the technical front, the gold market is "consolidating sideways," Commerzbank analysts said in a weekly note.
"It is not clear whether this is going to be a continuation phase or is in fact a possible base developing. It has started to erode the 55-day moving average and attention is on the four-month downtrend at $1,213.57."
Indicative of the recent waning investor interest in gold,
holdings of the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, fell to the lowest since February 2016, at 23.72 million ounces on Tuesday. Among other precious metals, silver was up 0.2 percent at $14.67 per ounce, hovering close to the previous session's high of $14.91, its highest in more than a month. Platinum rose 0.5 percent to $830.70 per ounce, while palladium gained 0.8 percent to $1,059.72.
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