Gold prices hit their lowest in over a week on Tuesday, as a lull in geopolitical tensions spurred a pick-up in investor appetite for riskier assets such as equities.
Asian shares marked a 10-year peak early in the day and the dollar held gains, with investors breathing a sigh of relief as fears over North Korea eased slightly and the worst-case scenario from Hurricane Irma looked to have been avoided.
Spot gold dipped 0.1 per cent to $1,325.11 an ounce by 0615 GMT, after earlier touching its lowest since September 1 at $1,322.85. The metal fell 1.4 per cent in the previous session, its biggest one-day percentage decline since early July. US gold futures for December delivery were down 0.4 percent at $1,330.40.
“The lack of an expected North Korean missile launch, and expectations that Hurricane Irma will have less of an impact than previously anticipated led to a rekindling of 'risk-on' sentiment,” said John Sharma, economist at National Australia Bank.
Irma, earlier ranked as one of the most powerful Atlantic hurricanes on record, was downgraded to a tropical storm on Monday after wreaking havoc across Florida.
Fears over North Korea receded slightly after the nation marked its founding day without further nuclear tests. The United Nations Security Council unanimously stepped up sanctions against North Korea over the country's sixth and most powerful nuclear test on September 3, imposing a ban on the country's textile exports and capping crude oil imports.
“We expect continued - although somewhat restrained - demand for gold due to continued economic and geopolitical uncertainty, which should keep gold slightly above $1,300/oz in the near future,” Sharma added.
Spot gold may drop to $1,317 per ounce, as it has broken support at $1,332, said Reuters technical analyst Wang Tao.
“We suspect that the dollar rally could have more room to run ... we could see a retracement in the precious metal to around $1,310-$1,315 before an element of underlying support sets in,” INTL FCStone analyst Edward Meir said in a note.
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies. However, analysts at Bank of America Merrill Lynch had said in a note on Monday that the US currency could remain supportive for gold, with the precious metal on track to hit its $1,400 per ounce target in coming months.
In other precious metals, silver was down 0.2 per cent at $17.77 an ounce after having earlier hit its lowest since September 1 Platinum was down 0.2 per cent at $988.05, while palladium was 0.7 per cent higher at $938.25 an ounce.