London - Gold retreated, after its biggest two-day surge in seven years, as global markets stabilized on speculation policy makers may do more to curb the post-Brexit fallout.
Bullion fell 1.2% as European equities and the pound climbed for the first time since the UK voted to leave the European Union.
Concern that an exit will disrupt the global economic recovery had caused market turmoil and boosted gold by 5.4% in just two days as investors sought a haven.
"We’re seeing a bit of risk-buying returning, which is normal after the big move we had on Friday and on Monday," Naeem Aslam, chief market analyst at brokerage TF Global Markets, said by phone from London.
"Trading conditions are displaying a semblance of normality, but we still think gold will push higher from here."
Gold for immediate delivery traded at $1 308.65 an ounce by 11:35 a.m. in London, according to Bloomberg generic pricing.
Prices have climbed 23% this year.
Gold rallied to a two-year high on Friday following the British referendum. Morgan Stanley joined other banks in increasing bullion forecasts for this year and next, citing risks surrounding Brexit and outlook for US interest rates to remain low.
Holdings in gold-backed funds are at the highest since September 2013.
Gold assets in exchange-traded funds rose 12.6 metric tons to 1 934.7 tons as of Monday, data compiled by Bloomberg show.
In other metals news:
Silver prices dropped 0.5% to $17.6457 an ounce. Platinum lost 0.5% at $974.76 an ounce. Palladium rose 0.8% to $560.95.