Gold fell on Monday as rising stock markets pointed to improved investor appetite for risk, with a slightly firmer dollar also sapping bullion’s appeal.
Spot gold was down 0.2 percent at $1,223.05 an ounce at 1302 GMT, having hit a 2-1/2-month peak last week at $1,233.26 per ounce. U.S. gold futures fell 0.2 percent at $1,226.90 an ounce.
Despite the market gathering a fair amount of technical momentum last week, breaking free of stock market fluctuations, some analysts said the outlook was not straightforward.
“The fundamental outlook for gold is still looking a little bleak despite the recent recovery, so I would not be surprised if gold was to falter from here,” said Fawad Razaqzada, an analyst with Forex.com.
“(We have) a slightly stronger dollar and positive sentiment in the stock markets – both of those factors are weighing.”
European shares gained ground after Moody’s kept Italy’s sovereign rating intact, with the market also taking cues from rallies in Asia after China’s promise to provide stimulus to stabilise its economy and offset the impact of U.S. tariffs.
Gold prices were still hovering around the 100-day moving average near $1,224, a key technical level, analysts said.
“We are still in a lateral phase between $1,220 and $1,230. I wouldn’t be worried about the low correction this morning as long as it is keeping positive momentum,” ActivTrades chief analyst Carlo Alberto De Casa said.
Geopolitical concerns, including tensions between Saudi Arabia and the West over the killing of journalist Jamal Khashoggi, and developments related to Brexit were seen keeping some investors favourably disposed towards gold.
“We saw a significant amount of short covering from speculators last week. With quite a bit of uncertainty, we could see that trend moving forward,” ING analyst Warren Patterson said.
“Maybe the market was surprised with how much short covering there was and that has taken the steam out of the (recent gold) rally.”
Gold speculators cut their net short position in COMEX gold contracts by 65,637 contracts to 37,372 contracts, the smallest since late July, in the week to Oct. 16, data showed.
Among other precious metals, silver was down 0.2 percent at $14.57 per ounce, while platinum was up 0.1 percent at $831.1.
Palladium climbed 2.3 percent to $1,104.8 per ounce, having touched its highest since Jan. 25 earlier in the session at $1,106.90.
The autocatalyst metal has seen fresh buying on the back of a recovery in Chinese equity markets, said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals. Industrial commodities tend to benefit from sharper appetite for risk.
