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Gold slides after French election revives risk appetite

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Gold fell by more than 1 percent on Monday, marking its biggest tumble in over a month, after the market's favored French presidential candidate won the first round of the country's election, easing concerns about a potential political shock.

Centrist Emmanuel Macron took a big step towards the French presidency on Sunday by winning the first round of voting, with the latest opinion polls showing him as strong favourite to beat far-right candidate Marine Le Pen in the final run-off.

The news represented a huge defeat for anti-European Union forces on the right and left of French politics, sent European shares and the euro vaulting higher and sparked a sell-off in safe-haven bullion.

Spot gold was down 0.68 percent to $1,275.31 per ounce, after falling to a near two-week low of $1,265.90 earlier in the session.

U.S. gold futures for June delivery were down $11.60 to settle at $1,277.50 an ounce.

"For the moment some of the tail risk in the form of a shock win by any of the other candidates has been averted. We see more downside in the very short term, leading up to the (French election) run-off in two weeks," said Societe Generale analyst Robin Bhar.

He added, however, that a weaker dollar and simmering geopolitical tensions in North Korea and the Middle East were probably enough to keep gold underpinned at about $1,250.

The dollar recovered somewhat from its steep overnight falls but was still down 1.3 percent against the euro and 1 percent against a basket of currencies, supporting dollar-priced gold by making it cheaper for non-U.S. investors.

"The predominant factor (for gold) will be the retreat of risk aversion. Indeed, while the the dollar weakened following the first round of the French election, gold has fallen by over 1 percent," Simona Gambarini, analyst at Capital Economics, told the Reuters Global Gold Forum.

Escalating geopolitical tensions had prompted speculators to increase their net long, or buy, positions in COMEX gold to a five-month high in the week to April 18, official data showed on Friday.

"Those speculative financial investors who had previously still been betting heavily on rising gold prices are likely to have covered many of their positions in response to the (French) election result," Commerzbank said in a note.

Spot silver dropped 0.11 percent at $17.86 an ounce, after earlier touching a one-month low of $17.65.

Platinum fell 1.70 percent to $954, while palladium was up 0.32 percent to $794.