NEW YORK (Reuters) - Gold fell near a six-month low on Tuesday, holding just above $1,600 an ounce, as an equities rally and signs of an improving global economic outlook dented bullion's safe-haven appeal.
The metal fell 0.5 percent as investors were drawn to riskier assets as the S&P 500 climbed to a five-year high with a string of recent merger activity suggesting stocks could offer even more value.
Technical weakness also sent precious metals lower across the board. Silver fell around 2 percent to a six-month low.
Fading currency risks about a chaotic break-up of the euro zone and recent data showing continued economic recovery around the world have lessened the need for bullion among investors, analysts said.
"You are seeing gold become an asset that investors no longer need to jump in on because the fact that these currencies are not going any time soon. So, the currency hedge is reduced markedly," said Adam Sarhan, chief executive of Sarhan Capital.
Spot gold fell 0.6 percent to $1,600.66 an ounce by 12:14 p.m. EST (1714 GMT), having earlier hit a low of $1,600.34, near a six-month low of $1,598.04 hit on Friday.
U.S. gold futures for April delivery dropped $8.90 to $1,600.60, with trading volume about 10 percent above its 250-day average, preliminary Reuters data showed.
Volume was higher than usual as it included Monday's electronic trading as U.S. markets were shut for the President's Day holiday.
Last week's 3.5 percent drop - the largest weekly fall since May 2012 - made gold vulnerable to further losses in the short term, traders said.
U.S. regulatory selling showing bullion selling by Notable institutional investors, including George Soros, Julian Robertson and Allianz's PIMCO in the fourth quarter of 2012 also weighed down on sentiment.
Investors will scour the minutes from the latest policy meeting of the U.S. Federal Reserve due on Wednesday for hints on the central bank's attitude to monetary stimulus, which has been a key driver behind gold's rally over the past two years.
Silver, which tends to be more volatile than gold, fell 2 percent to $29.25 an ounce.
Platinum prices fell after platinum producer Anglo American Platinum (AMSJ.J) said operations at its South African mines should resume on Wednesday.
Spot platinum fell 0.3 percent to $1,686.24 an ounce, while palladium edged up 0.1 percent to $762 an ounce.
Year to date, platinum is outperforming gold after Amplats said it planned to restructure its South African mines and to cut 14,000 jobs.
Broker UBS cut its one-month platinum forecast to $1,650 from $1,720, anticipating potential downside risks to sentiment surrounding the broad U.S. automatic spending cuts due in March.
Additional reporting by Clara Denina in London; editing by Andrew Hay