Gold slips to two-week low on improved risk appetite; equities rally

[BENGALURU] Gold fell to a two-week low on Wednesday as investor appetite for riskier assets surged on renewed optimism over the US economy and as political uncertainty in France receded, softening demand for safe-haven assets.

Spot gold was mostly unchanged at US$1,263.55 at 0322 GMT. Prices touched a low of 1,260.90 earlier in the session, the lowest since April 11.

Bullion fell 0.9 per cent on Tuesday, the biggest one-day decline since March 2.

US gold futures were down 0.2 per cent at US$1,265.40 an ounce.

Asian stocks extended gains for a fifth straight day on Wednesday as Wall Street hit new peaks.

"Over the past two sessions, the momentum for gold to move ahead has actually faded away. We can see that risk appetite has increased after the easing situation in North Korea and French election results," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

"We have to move back to the original gravity of trading range of US$1,200-US$1,250."

The Nasdaq Composite hit a record high on Tuesday, while the Dow and S&P 500 brushed against recent peaks as strong earnings underscored the health of corporate America.

US President Donald Trump is proposing to slash the corporate income tax rate and offer multinational businesses a steep tax break on overseas profits brought into the United States, officials said late on Tuesday.

"For gold investors this may not be good news as the overall situation for the Trump administration is to ensure that there is sufficient capital inflows to asset markets including equities or dollar to finance fiscal deficit," said Mr To.

"They have to balance it by keeping the original momentum by rising rates and use fiscal policies to attract more and more people to the US stock markets, which will be negative for gold."

The threat of a US government shutdown this weekend appeared to recede on Tuesday after President Donald Trump backed away from a demand that Congress include funding for his planned border wall with Mexico in a spending bill.

Political concerns in France ebbed after business-friendly centrist Emmanuel Macron won the first round of the French vote on Sunday and opinion polls indicated less support for the eurosceptic Marine Le Pen.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.69 per cent to 854.25 tonnes on Tuesday after six tonnes of inflows.

Spot gold is expected to fall to US$1,249 per ounce, as it has broken a support at US$1,265, according to Reuters technical analyst Wang Tao.

Spot silver edged up 0.4 per cent to US$17.61 an ounce, after falling 2 per cent to a one-month low of US$17.55 in the prior session.

Platinum dropped 0.1 per cent to US$949.10 an ounce, while palladium fell 0.2 per cent to US$798.95.

REUTERS