LONDON (Reuters) - Gold eased after setting a one-month high on Tuesday in response to rising political uncertainty in Europe which spurred increased safe-haven demand.
The metal, often seen as an alternative investment during times of political and financial uncertainty, benefited from a risk-averse mood in global markets along with the Japanese yen and U.S. Treasuries.
Spot gold touched a one-month high of $1,270.47 before pulling back 0.3 percent to $1,262.60 per ounce by 1403
U.S. gold futures slipped 0.4 percent to $1,263.30 an ounce as the dollar firmed.
Investors are concerned about next week’s election in Britain, as well as the prospect of early elections in Italy and worries over Greek debt, which analysts said supported gold and dented stocks.
A poll in Britain on Tuesday showed Prime Minister Theresa May’s lead over the opposition Labour Party dropping to 6 percentage points ahead of the election on June 8.
“Ideally to see a rally in the (stock) markets the UK would want to see Theresa May win by an overwhelming majority which seems to be less likely to happen taking into account the latest polls,” Natixis precious metals analyst Bernard Dahdah said.
“If May wins with her current lead it will be slightly negative for her negotiation hand (in Brexit talks) and ... positive for gold.”
In Italy, former prime minister Matteo Renzi suggested on Sunday that the country’s next election be held at the same time as Germany‘s. Germany will vote on Sept. 24, while elections are due in Italy by May 2018.
Euro zone finance ministers’ failure to agree on Greek debt relief with the International Monetary Fund last week also added to risk aversion.
“The ongoing political uncertainty in the market is really driving safe-haven buying at the moment,” ANZ analyst Daniel Hynes said.
“Weaker equity markets certainly have played their part, but support from that has been sporadic and we’re continuously seeing a strong level of safe-haven demand being the primary driver still.”
Forex.com market analyst Fawad Razaqzada said the focus for bullion this week was U.S. non-farm payrolls due on Friday.
“I expect the dollar to continue to strengthen this week until Friday’s jobs data release, therefore I think gold is going to go down from here,” Razaqzada said.
Among other precious metals, silver marked its highest level since April 27 at $17.47 an ounce. It was last flat at at $17.35.
Palladium was flat at $797.22 after breaching $800 an ounce on Monday. Platinum was down 1.2 percent at $941.24 an ounce.
Additional reporting by Nithin ThomasPrasad and Vijaykumar Vedala in Bengaluru; Editing by Susan Fenton and Jane Merriman