Gold bars and granules. File photo: Reuters

London - Gold prices slid more than 1 percent on Monday as a rebound in stock markets prompted investors to cash in gains after last week's rise to 3-1/2 month highs, after concerns over the euro zone periphery faded.

Stock markets in Europe and Asia rose as investors put aside concern about the currency bloc's banks and looked forward to corporate earnings and a raft of global economic events, including testimony from the head of the US Federal Reserve.

Spot gold was down 1.6 percent at $1,317.10 an ounce at 13:42 SA time, on track for its biggest one-day loss in nearly seven weeks. US gold futures for August delivery were down $19.10 an ounce at $1,318.30.

The metal rallied to its highest since mid-March at $1,345 an ounce last week after minutes of the US Federal Reserve's last meeting showed a dovish tone and as concerns about Portugal's largest listed bank sparked heavy selling of equities.

“There has been some profit-taking this morning,” Andrey Kryuchenkov, an analyst at VTB Capital, said.

“The market overshot to the upside after the Fed minutes last week, the dollar generally held well and we are still not seeing substantial physical flows.”

He added, “Peripheral yields have stabilised (and the concern over Portugal) is likely to be a one off event. I don't think there will be enough risk aversion to stimulate more gold buying here.”

Portuguese bond yields fell on Monday, retreating further from a six-week high on July 10, after the country's biggest bank took steps aimed at reassuring investors of its stability, calming peripheral debt markets after their first episode of contagion this year.

European stocks rallied from last week's near two-month lows after their biggest weekly loss in four months, boosted by merger and acquisition activity.

The currency markets were relatively quiet, with the dollar index creeping 0.1 percent lower as investors awaited Fed Chair Janet Yellen's congressional testimony for clues on the direction of US monetary policy.




Investors were also eyeing physical buying in Asia, which has been subdued due to the recent price gains.

“There isn't much demand from India, China or anywhere in Southeast Asia for the last few weeks,” a dealer in Singapore said. “Unless prices drop sharply in a short period of time, I don't think we can expect any price support from the physical markets.”

India surprised bullion markets last week by keeping its import duty on gold and silver unchanged at 10 percent in its budget, a move likely to limit overseas purchases by the second-biggest bullion consumer and further encourage smuggling.

“The Indian budget didn't mention anything about gold,” Natixis analyst Bernard Dahdah said.

“There was a lot of anticipation (that it would loosen) duties and the 80:20 ratio of imports to exports. If it had done that, it would have lifted the price of gold, but this didn't happen. There's a bit of disappointment over that.”

Among other precious metals, silver was down 1.5 percent at $21.07 an ounce.

Spot platinum was down 0.7 percent at $1,495.60 an ounce, while spot palladium was down 0.4 percent at $866.30 an ounce.

The world's biggest platinum producer, Anglo American Platinum, said on Monday its first-half earnings would fall by as much as 96 percent after a five-month strike - the longest and most damaging in South African history - crippled its operations. - Reuters