Gold extends drop as risk appetite returns on possible stimulus

[SINGAPORE] Gold extended a decline as equities climbed on the back of possible fiscal stimulus in the UK and Japan, while a better-than-expected US jobs report eased concerns about the state of the world's biggest economy.

Bullion for immediate delivery was 0.1 per cent lower at US$1,353.46 an ounce at 9:11 am in Singapore, according to Bloomberg generic pricing. The metal touched US$1,375.34 on Monday, the highest intraday level since March 2014.

Risk appetite has returned to global markets, with shares rallying on expectations the Bank of England will cut rates at a meeting this week, while Japan's Prime Minister Shinzo Abe said he planned to add fiscal stimulus following the ruling coalition's election victory.

A surge in demand for haven assets this year amid financial market turmoil following the Brexit vote in the UK, and a pause in the US Federal Reserve's monetary tightening path, had pushed gold to its highest in more than two years.

Following the stronger-than-expected employment report in the US on Friday, traders are now seeing the probability of a Fed interest-rate increase by December at around 29 per cent from 12 per cent on Thursday. Higher rates curb the appeal of precious metals because they don't offer yields or interest.

"Gold was weaker as a risk-on tone saw investors move back into equities," analysts at Australia & New Zealand Banking Group Ltd said in a note.

BLOOMBERG