By Peter Hobson
LONDON (Reuters) - Gold fell on Tuesday to its lowest since mid-March as the election of centrist Emmanuel Macron as French president reduced demand for bullion as a safe haven while stocks and the dollar rose and 10-year U.S. bond yields hit a five-week high.
Revived appetite for riskier assets has pushed global stocks to record highs, while the market's so-called fear gauge, the VIX volatility index, fell to its lowest since 1993.
Rising stocks and higher bond yields raise the opportunity cost of holding non-yielding bullion, while a stronger dollar makes gold more expensive for holders of other currencies.
The spot gold price was down 0.5 percent at $1,220.30 an ounce at 1246 GMT, falling below its 100-day moving average, a key technical support level currently at $1,224.
U.S. gold futures were 0.5 percent lower at $1,220.70 an ounce.
"With one of the largest political risk events now cleared, some consolidation is warranted, albeit political uncertainty lingers in Italy and is likely to remain for some time," UBS analyst Joni Teves said.
"Further pressure cannot be ruled out for now but we expect bargain hunting to emerge and physical buying to strengthen should the market test $1,200, paving the way for a recovery."
Investors were looking ahead to U.S. interest rate rises that would pressure gold as they tend to push up bond yields and strengthen the dollar.
The president of the Cleveland Federal Reserve said on Monday further increases were warranted, while the head of the St. Louis Fed said strong bond demand and sluggish workforce growth would limit rate rises.
Interest rate futures implied traders saw an 83 percent chance the Fed would raise rates by a quarter point in June, up from 79 percent late on Friday, CME Group's FedWatch programme showed.
But ING analyst Hamza Khan said steady demand for physical gold in China and India and increased buying from central banks, particularly in China and Russia, would support prices.
"Incremental increases in the U.S. interest rate and higher gold prices can go hand in hand," he said. "I don't see prices much below here for much longer."
In other precious metals, silver was down 0.3 percent at $16.19 an ounce. Platinum was 1.4 percent lower at $903.90 and palladium was down 0.8 percent at $800.97 an ounce.
(Additional reporting by Swati Verma in Bengaluru; editing by David Clarke and David Evans)
Disclaimer: No Business Standard Journalist was involved in creation of this content
