London - Gold steadied below $1,200 an ounce on Tuesday after its biggest one-day drop in a week, remaining under pressure as the dollar rose and a rally in global equities diverted interest from the precious metal.
European stocks rose nearly 1 percent following a strong session in Asia, with a raft of positive corporate earnings pushing equities higher, and after China's latest step to prop up its faltering economy lifted global equities.
Spot gold was at $1,196.83 an ounce at 09h43 GMT, little changed from late on Monday, when it fell 0.7 percent. US gold futures for June delivery were up $3.00 an ounce at $1,196.70.
“Gold was being weighed down yesterday by the firmer dollar and the rising equity markets, and these two factors are preventing gold from regaining the $1,200 mark this morning,” Commerzbank analyst Daniel Briesemann said.
“The directionless trading that we're currently seeing will probably continue for the time being,” he said. “I don't see the move below $1,200 triggering anything more spectacular.”
Upbeat European earnings reports helped lift world stocks back towards all-time highs, offsetting worries about a possible Greek default. Worries about Greece pressured the euro, however.
The single currency fell 0.5 percent against the dollar, piling pressure on gold, which is priced in the US unit.
Gold prices have been weighed down this year by expectations that the Federal Reserve is preparing to hike interest rates for the first time in nearly a decade.
That would boost the dollar and lift the opportunity cost of holding non-yielding gold. Until further clarity is received on the outlook for US rates, gold will likely struggle for direction, analysts said.
“Overall uncertainty on the timing and pace of Fed tightening adds to investors' reluctance to put on sizeable positions at this point,” UBS said in a note on Tuesday.
Physical demand in China, the second largest gold consumer, was lacklustre overnight, traders said, with precious metals house MKS reporting “low turnover and modest price action” in Asian trading hours.
Traders were also watching physical demand in top consumer India, which celebrates the Akshaya Tritiya festival, considered one of the most auspicious days to buy gold, on Tuesday.
Supply of the metal into India rose sharply in the build-up to the festival, although it remains to be seen if consumers will buy with their usual enthusiasm after a drop in gold prices.
Silver was up 0.8 percent at $16.03 an ounce, while platinum was up 0.4 percent at $1,148.65 an ounce and palladium was up 0.5 percent at $773.37 an ounce.
Reuters