Gold prices fell on Tuesday as US stock markets stabilised, easing fears of a deeper selloff, and the US dollar strengthened, making bullion more expensive for users of other currencies.
Gold had surged on Monday as falling US share prices and fears of a global trade war pushed investors towards safer assets.
But while European stock markets continued to fall, led by technology shares, Wall Street rebounded.
Spot gold dropped 0.6 per cent to $US1,333.09 per ounce, after rising 1.3 per cent on Monday.
US gold futures for June delivery settled down $US9.60, or 0.7 per cent, at $US1,337.30 per ounce.
‘Gold has given back some of its sharp gains from yesterday. As well as a slightly positive tone in the stock markets, the dollar has rebounded against both the euro and the yen,’ said Forex.com market analyst Fawad Razaqzada.
‘The potential for a dollar rally is there this week, with Friday’s jobs report being the key event risk. Should the greenback regain its poise then gold could come under further pressure.’
Gold has struggled to break from a $US1,300-$US1,360 per ounce trading range since the start of the year.
‘It’s going to take a significant trigger to push it beyond this range,’ said Danske Bank analyst Jens Pedersen.
One potential trigger is a trade dispute between the world’s two largest economies, with the Trump administration expected this week to unveil a list of advanced technology Chinese imports targeted for US tariffs after Beijing raised tariffs on 128 US products.
Gold is often used as a safe place to park assets during times of financial or political uncertainty.
Funds have raised their bets on higher prices.
Speculative investors have room to expand their long positions further, which would help drive prices higher, analysts at Citi said in a note.
Higher market volatility and rising tension between Washington and Beijing will likely hold gold prices above $US1,300 per ounce throughout 2018, they said.
‘We assign a 30 per cent probability that gold prices can scale $US1,400 an ounce this year.’
Meanwhile, spot silver shed 1.1 per cent to $US16.42 an ounce after rising 1.8 per cent in the previous session.