Gold slides after preliminary French vote results revive risk appetite

NEW YORK/LONDON — Gold fell more than 1% on Monday, after the market’s favored French presidential candidate won the first round of the country’s election, but prices pared losses as US Treasury yields came off their highs.

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 favorite to beat far-right candidate Marine Le Pen in the final run-off.

The news represented a 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 0.70% at $1,275 an ounce by 3:19 p.m. EDT (1919 GMT), having touched its lowest in nearly two weeks at $1,265.90.

US gold futures settled down 0.90% at $1,277.50.

Gold came off its lows as the US dollar index rebounded from a five-and-a-half-month low and 10-year US Treasury yields pared gains made earlier in the session.

“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.

“We have shifted our threemonth view to bearish from bullish, targeting $ 1,200/ oz from $1,300/oz previously,” said Giovanni Staunovo, analyst for UBS Chief Investment Office, adding that two factors drove this short-term view.

“The market is now underpricing our view of two additional Fed rate hikes this year and the prospect of a balance sheet reduction (and) easing political risks.”

In the wider markets, global equity markets rallied to send a gauge of world stock indices to a record high.

“The predominant factor (for gold) will be the retreat of risk aversion,” Simona Gambarini, analyst at Capital Economics, told the Reuters Global Gold Forum.

Escalating geopolitical tensions had prompted speculators to increase their bullish position in COMEX gold to a five-month high in the week to April 18, official data showed.

Spot silver was down 0.20% at $17.85 an ounce after touching a one-month low of $17.65.

Platinum was down 1% at $ 961.20, while palladium rose 0.60% to $796.50.