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[LONDON] Gold prices surrendered early gains to turn lower on Tuesday as news that the Greek government had dropped calls for a write-off of its foreign debt sharpened risk appetite, sparking a rally in stock markets.
The metal benefited in earlier trade from gains in other commodities, but came under pressure as the day progressed as interest waned in gold as a haven from risk.
Spot gold was down 0.5 per cent at US$1,268.90 an ounce by 1321 GMT, off an earlier high of US$1,284.10. US gold futures for April delivery were down US$7.10 an ounce at US$1,269.80.
European shares rose one per cent on Tuesday and US stock index futures climbed, with the benchmark S&P 500 index set to continue a rally fuelled by hopes of a deal on Greek debt.
Greece's new government proposed ending a standoff with its official creditors by swapping its foreign debt for growth-linked bonds, a week after its election on an anti-austerity platform.
"(There is some) repositioning away from safe havens," Mitsubishi analyst Jonathan Butler said. "US$1,280 was taken out, the 50 per cent retracement of the year-to-date high to last week's low. That may have triggered some sell orders."
Gold prices rose more than 8 per cent in January, their strongest month in three years, though expectations for a US interest rate increase later in the year kept a lid on gains.
The metal remains sensitive to US data, as traders try to anticipate when the Federal Reserve will raise rates.
Downbeat reports on US consumer spending and factory activity helped gold pare losses on Monday, and nonfarm payrolls (NFP) numbers on Friday will be closely watched.
A Reuters poll of analysts forecast US employment data on Friday would show about 230,000 jobs were created in January, slowing slightly from 252,000 in December but still robust.
"I do not see much real interest in the market before the NFPs this Friday," Afshin Nabavi, head of trading at MKS in Switzerland, said.
Fresh inflows were seen into gold-backed exchange-traded funds on Monday, with holdings of the largest, New York-listed SPDR Gold Shares, climbing to their highest since October at 24.65 million ounces.
Among other precious metals, silver was up 0.4 per cent at US$17.27 an ounce. Platinum was up 0.2 per cent at US$1,227.75 an ounce, while palladium was up 0.9 per cent at US$790.50 an ounce.