* European shares gain, dollar firms
* Japan unveils $4 bln economic package
* SPDR Gold holdings rise to highest since October 2016
By Sumita Layek
March 10 (Reuters) - Gold prices fell more than 1% on Tuesday, pulling back after breaching $1,700 in the previous session, as risk sentiment improved and the dollar firmed on expected global support measures to soften the economic impact from the coronavirus.
Spot gold lost 1% to $1,662.56 an ounce by 1206 GMT. U.S. gold futures fell 0.7% to $1,663.70.
“It’s the stabilisation in financial markets; we see gains in stock markets, yields are edging up, dollar is up. So factors which had supported gold in the last few days are now turning negative for it,” said Quantitative Commodity Research analyst Peter Fertig.
Stimulus hopes and recovering crude oil prices are also leading to a recovery for risky assets and a move out of safe havens, Fertig added.
Bullion rose as much as 1.7% on Monday to its highest since December 2012 at $1,702.56 after a rout in global equity markets on fears over the coronavirus and a crash in crude oil prices triggered by a price war between top producers Saudi Arabia and Russia.
U.S. President Donald Trump said he would take steps to bolster the economy and Japan unveiled a second package of measures worth about $4 billion to cope with fallout from the virus outbreak.
European shares rose and bond yields increased from record lows on stimulus hopes while the dollar firmed against rivals.
However, investors remained cautious as total global infections touched 111,600 by Monday.
Apart from the virus-led uncertainty, the global implications of the oil price war would also support gold in the near term, said FXTM market analyst Han Tan.
“I wouldn’t be surprised if gold makes another run for $1,700 ... triggered by further signs of the outbreak worsening or as we get confirmation in hard data that major economies are wilting under the weight of this outbreak.”
Investors are now focused on a European Central Bank policy meeting on Thursday, where it is expected to follow the U.S. Federal Reserve by easing interest rates. Markets are also expecting another cut at the Fed’s March 18 meeting.
Holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to 30.99 million ounces, its highest since October 2016.
In other precious metals, palladium fell 2.5% to $2,428.30 an ounce, silver gained 0.7% to $17.08 and platinum rose 2.6% to $885.01.
Reporting by Sumita Layek in Bengaluru Editing by Ed Osmond and David Goodman