Investing.com -- Gold fell sharply in broad risk-on trade, as the Dow Jones Industrial Average surged to an all-time intraday high on Tuesday morning, dampening the precious metal's demand as a safe-haven asset.
On the Comex division of the New York Mercantile Exchange, Gold for August delivery traded between $1,331.00 and $1,358.70 an ounce, before settling at $1.335.50, down $21.05 or 1.55% on the session. With the considerable losses, Gold suffered its worst one-day session since June 21 when it tumbled by more than 1.5% in pre-Brexit trade amid indications that the Stay campaign had taken a commanding lead in a wide sampling of closely-watched polls. Days later, Gold surged nearly 5% following the shocking decision by U.K. voters to approve a measure to leave the European Union, prompting investors to engage in a flight to safety to the Yellow metal. As market players have piled into Gold over the last several weeks, the commodity soared above $1,370 last Wednesday to hit a 28-month high. Since opening the year around $1,075 an ounce, Gold has surged more than 27% over the first seven months of 2016.
Gold likely gained support at $1,323.50, the low from June 8 and was met with resistance at $1,391.40 the high from March 17, 2014.
U.S. stocks opened at record-highs, as the Dow surged more than 100 points to an intra-session high of 18,353.76, eclipsing the previous all-time intraday high of 18,351.36 from last May. Since tumbling by more than 850 points over a two-day, post-Brexit sell-off, the Dow has rallied approximately 1,300 points during the massive global equities rally. At the same time, the S&P 500 Composite index reached fresh intraday highs for the second consecutive session, while the NASDAQ Composite index erased all of its losses on the calendar year.
Meanwhile, Federal Reserve Bank of St. Louis president James Bullard reiterated his position that current economic conditions deem it appropriate for the U.S. central bank to raise short-term rates only once over the next two years. While delivering a speech in St. Louis, Bullard noted that a flattening yield curve from plummeting long-term U.S. Treasury yields does not necessarily imply signals of an imminent recession. In the wake of last month's Brexit decision, government bond yields worldwide, including those on U.S. 10-Year and 30-Year Treasuries have plunged to all-time record lows.
"Wall Street is taking it as a signal that growth is slowing. I think it is a flight to safety following the Brexit shock," Bullard said. "That is driving yields down and I would not take it as a signal of U.S. growth prospects."
Despite Bullard's dovish position, analysts from Goldman Sachs Group Inc (NYSE:GS) said Tuesday they still anticipate that the Federal Open Market Committee (FOMC) will "return to hiking rates," before long. Following a relatively strong U.S. employment report for the month of June, the Fed Futures Rate for a single rate hike in 2016 increased to 32.7% on Tuesday, up from 12% before last Friday's release.
Investors who are bullish on Gold are in favor of a gradual tightening of monetary policy by the Fed. Gold, which is not attached to interest rates, struggles to compete with high-yield bearing assets in rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.40% to an intraday low of 96.08 before rallying to 96.32 in U.S. afternoon trading. Despite a recent upturn, the index is still down more than 3% since early-December.
Dollar denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for August delivery lost 0.141 or 0.69% to $20.163 an ounce. Last week, the front month contract for silver futures surged above $21.20 an ounce to hit fresh two-year highs.
Copper for September delivery soared 0.065 or 3.00% to $2.212 a pound.