Tokyo - Gold prices fell more than 2% on Monday, slipping towards a 2-½ month low near $870 an ounce as a rise in Asian stocks signalled reduced risk aversion among investors hoping the worst is over for the United States economy.
Gold dropped on Friday on receding concerns about exposure to riskier assets, coupled with signs of a firmer tone in the global economy after the G20 leaders' summit.
"It's the whole idea of unwinding of risk aversion and people moving out of gold into riskier assets," said Darren Heathcote of Investec Australia.
Gold stood at $877.95 an ounce as of 06:42 GMT, down 1.6% from New York's notional close at $892.50. It fell as low as $873.45, the lowest since January 29.
Gold has now fallen about 13% since touching an 11-month high above $1 000 in February.
US gold futures for June delivery fell as much as 2.5% to $875.1.
Japan's Nikkei stock average hit a three-month closing high on optimism over the US economy, which would help leading Japanese exporters.
The yen slid towards a six-month low against the dollar and the euro as investor risk appetite grew. The dollar also faced selling pressure, except against the yen, as investors' views on the US economy improved, leading them to cut their safe-haven dollar holdings.
Gold-backed ETF unchanged
Heathcote said funds started to move out of gold late last week to more attractive assets, including base metals, which are used in a wide range of industries.
He said he saw support at $875.
Copper soared to five-month highs on Friday on the London Metal Exchange as upbeat economic data boosted investor confidence in the global economy.
Traders said the fall in the gold price had led to some physical buying, but that investors remained cautious as they anticipated further falls amid receding risk aversion.
"I think people are still testing the bottom side ... we see some physical buying but not that huge an amount," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"Anything below $850 would be more attractive for those interested in buying," he said.
Exchange-traded funds (ETFs), which back up the securities they issue with physical commodities, are a major element of demand.
The world's largest gold-backed ETF, the SPDR Gold Trust, said its holdings were largely unchanged at 1 127.37 tonnes by April 3, a whisker down from a record 1 127.44 tonnes first reached on March 29.
In contrast, silver holdings rose. The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its holdings rose 119.55 tonnes or 1.4% from the previous day to a record 8 413.01 tonnes as of April 3.
Other precious metals have also tracked gold's decline, with platinum down about 1.6% and silver dropping some 2.8%.
A weekly report by the US Commodity Futures Trading Commission showed non-commercial net long gold futures positions rose to 154 859 lots in the week ended March 31 from 151 927 lots a week earlier.
- Reuters