Gold prices fell on Tuesday, weighed down by an uptick in risk appetite as oil prices recovered and a number of countries eased coronavirus-induced restrictions in an effort to revive economic activity.
Spot gold fell 0.1 per cent to $1,699.33 per ounce by 6:19pm UAE time on Tuesday. US gold futures fell 0.5 per cent to $1,705.40.
"There's general optimism with the global economies opening up, which could mean interest rates will move a little bit higher ... and that should strengthen the dollar and pressure gold. That's why we've come off the $1,700 mark," said Edward Meir, analyst at ED&F Man Capital Markets.
However, gold's trajectory is likely to be "fairly constructive" this year given that the global economy could take a long time to recover, Mr Meir added. Global stock markets snapped a three-day losing streak on Tuesday and oil was on its longest run of gains in nine months as moves to ease major economies out of lockdowns lifted sentiment.
Italy and the US were among several countries to tentatively ease lockdowns on Monday to revive their economies. Further limiting gold's appeal, the dollar index rose versus major currencies. Market participants were also watching rising China-US tensions after President Donald Trump threatened new tariffs on China for its handling of the virus outbreak. The pandemic, which has battered global growth and prompted governments to unleash a wave of fiscal and monetary measures to limit economic damage, has infected about 3.6 million people globally and killed more than 250,000, according to Johns Hopkins University, which is tracking its spread.
Gold tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement.
"Gold remains as a safe-haven as currencies are being devalued by massive stimulus programmes introduced by central banks and governments around the world to alleviate the worst of the Covid-19 outbreak," brokerage Phillip Futures said in a note.
"This has also increased physical demand of gold to hedge against the debasement of fiat currencies thereby triggering a huge demand for gold ingots, bars and coins."
Indicative of sentiment, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , rose 0.4 per cent to 1,071.71 tonnes on Monday.
Elsewhere, palladium dropped 4 per cent to $1,773.93 per ounce. The precious meta, which is used in car exhausts as a catalyst, has shed 9 per cent so far this year, hit by falling car sales globally.
Platinum fell 0.1 per cent to $765.07 and silver rose 0.4 per cent to $14.90.
