NEW YORK/LONDON (Reuters) - Gold dropped to an eight-week low on Tuesday as safe-haven demand continued to fade in the wake of Emmanuel Macron's victory in the French election and as expectations for tighter U.S. monetary policy lifted bond yields.
Revived appetite for riskier assets also pushed global stocks to record highs, while the U.S. dollar index rallied.
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 0.8 percent at $1,215.81 an ounce by 2:19 p.m. EDT (1819 GMT), after falling below its 100-day moving average to $1,214.39, the lowest since March 15.
U.S. gold futures settled down 0.9 percent at $1,216.10.
"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.
Boston Federal Reserve President Eric Rosengren said the fall of U.S. unemployment below its natural equilibrium could prompt faster interest-rate hikes if it were to drop below 4 percent. Kansas City Fed President Esther George said the falling jobless rate means that adjusting monetary policy is of "paramount importance."
U.S. bond yields hit a five-week high and the dollar strengthened as interest rate futures implied traders saw an 88 percent chance the Fed would raise rates by a quarter point at a meeting in June, CME Group's FedWatch program showed.
"With the Fed likely continuing to signal more hikes, speculative investors who hold an outsized amount of net long positions could well be tempted to unload and take profits," said TD Securities in a note late Monday.
"But since the U.S. central bank is not going to be overly aggressive in how it removes monetary accommodation, equity market correction risk and concerns the U.S. central bank may eventually fall behind the inflation curve, should provide support for the yellow metal."
In other precious metals, silver was down 1 percent at $16.07 an ounce, after falling to $16.01, the lowest since Jan. 3.
Platinum was 1.9 percent lower at $898.98 and palladium was down 1.6 percent at $794.40 an ounce.
Additional reporting by Swati Verma in Bengaluru; editing by Susan Fenton