Gold holds steady as dollar gains, risk sentiment improves

• Spot gold was little changed at $1,702.64 per ounce by 1204 GMT, having lost about 1% on Friday.
• US gold futures fell 0.4% to $1,707.30 per ounce.

Gold held steady on Monday as pressure from a firmer dollar and an uptick in risk appetite after many countries eased lockdowns was offset by concerns over a pick-up in new coronavirus cases, which kept some investors on edge.

Spot gold was little changed at $1,702.64 per ounce by 1204 GMT, having lost about 1% on Friday. US gold futures fell 0.4% to $1,707.30 per ounce.

"There is still so much uncertainty out there, with some economies starting to ease up on their restrictions and others, like South Korea for example, seeing the return of the infection rate," said INTL FCStone analyst Rhona O'Connell.

"However, in the near term, expect gold prices to be steady around these levels or to drift a little lower because there is a little bit more confidence in the economic recovery."

The dollar index gained 0.3% against a basket of major currencies, limiting any recovery in gold after the previous session's losses.

Optimism over a potential recovery in economic growth as many countries starting to ease virus-driven lockdowns boosted investors' sentiment towards riskier assets.

Japan said it could end its state of emergency in many regions this week, and New Zealand said it could ease restrictions on Thursday. Britain has also set out plans to ease the lockdown, while in France shops re-opened on Monday.

However South Korea warned of a second wave of the new coronavirus as infections rebounded to a one-month high, while the rate of new cases accelerated in Germany.

Speculators reduced their bullish positions in COMEX gold contracts in the week to May 5, the US Commodity Futures Trading Commission (CFTC) said on Friday.

"Gold prices could climb noticeably if speculative investors were to jump on the bandwagon - and there is certainly good reason for them to do so," Commerzbank analysts said in a note.

"They just need to look at the extremely expansionary measures taken by central banks and governments, which will lead to a massive increase in balance sheets and national debt levels."

The latest batch of poor economic readings out of the United States underscored the impact of the virus and lifted expectations of further stimulus measures from the Federal Reserve.

Gold tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement.

Among other precious metals, palladium eased 0.3% to $1,876.52 an ounce, while platinum fell 0.1% to $764.37 and silver gained 0.4% to $15.50.