Gold prices eased a touch in Europe on Wednesday after well received U.S. economic data and a spate of upbeat corporate earnings deflected interest away from bullion on to higher-risk, higher-yielding assets.
Concerns over unrest in Egypt and the prospects that it could spread into the wider Middle East are continuing to prompt some buying of gold as a haven from risk, but slackening investment interest in the metal is outweighing that for now.
Spot gold was bid at $1,337.25 an ounce at 1042 GMT, against $1,340.45 late in New York on Tuesday. U.S. gold futures for April delivery fell $2.30 an ounce to $1,338.10.
We still think there are reasons to see higher gold prices through this year, but right now the slew of positive macro data particularly coming out of the United States ... is all very encouraging (for the wider economy), said Societe Generale analyst David Wilson.
It seems to be that the positive global macro data is balancing regional risk from Egypt.
World stocks hit 29-month highs on Wednesday, with strong factory data pointing to sustained global economic recovery and positive corporate earnings fuelling gains.
European shares also rose as corporate earnings continued to underpin investor risk appetite. Industrial metals firmed, with copper approaching a record $10,000 a tonne, while oil steadied after the previous session's losses.
While cyclical assets have benefited from a more positive view of the economic outlook, gold has not, analysts said.
Investors are still reluctant to jump back on the market, expecting little upside for gold should risk aversion retreat, while major central banks will eventually have to turn back to tackling inflation and reducing liquidity, said VTB Capital.
Traders will be closely watching U.S. employment data due later in the session for further signs of recovery.
EGYPT LENDS SUPPORT
Concerns over unrest in Egypt continued to support gold prices, however.
Turkey's Prime Minister Tayyip Erdogan urged Egyptian President Hosni Mubarak to start a transition of power sooner rather than later, a day after Mubarak announced he would surrender power in September.
Mubarak's statement had angered protesters who want an immediate end to his 30-year rule and prompted the United States to say change must begin now.
Political turmoil in Egypt couldn't have come at a better time for gold, said UBS in a note. With demand from China, the largest physical consumer of late, slowing into the Lunar New Year, geopolitical risk has provided a new support.
Not that events in Egypt have injected a premium into the gold price - they have not - but they have kept more weak longs from liquidating and induced some short-covering.
Among other precious metals, palladium prices rose toward their highest in nearly a decade after a raft of upbeat car sales numbers. Like platinum, the majority of palladium is consumed by car manufacturers for use in catalytic converters.
General Motors Co and Chrysler posted U.S. sales gains of more than 20 percent for January, while U.S. auto sales rose 17 percent, a sign that the consumer-led recovery remained on track.
Platinum was at $1,829.40 an ounce against $1,825, while palladium was at $819.50 against $819.47. Silver was bid at $28.38 an ounce against $28.49.