Risk Appetite Surge Tempers Gold Rally as Investors Eye Fed Moves

Gold prices experienced a downturn on Tuesday, influenced by a revitalized risk appetite that boosted global equities. Investors are keenly awaiting forthcoming U.S. economic data, which holds the potential to shape future interest rates. Spot gold decreased by 0.4% to $5,042.63 per ounce by 1213 GMT, down from the record high of $5,594.82 achieved on January 29.

April delivery U.S. gold futures dropped 0.3% to $5,065.60 per ounce. Analyst Ricardo Evangelista from ActivTrades noted, "This week's onset has seen a resurgence in risk-taking across financial markets, evident in rising equity indices, which in turn has pressured gold prices." The gains in Asian stock markets, particularly in Tokyo, followed Japanese Prime Minister Sanae Takaichi's solid election win.

With the U.S. dollar inching up 0.1%, dollar-based commodities have become pricier for non-dollar holders. Critical U.S. economic data releases, including nonfarm payrolls and inflation figures, are slated this week; these reports will be scrutinized for hints on the Federal Reserve's interest rate strategy. Additionally, White House economic advisor Kevin Hassett cautioned of potential declines in U.S. job growth due to slowing labor force expansion.