Gold prices moved sharply lower on Tuesday on signs of growing investor appetite for riskier assets, as oil prices jumped and equities rallied for a third day. Gold for April delivery dropped $24, or 2%, to $1,213 an ounce, setting it on track for the lowest settlement since Feb. 10. The slide comes as investors warmed up to taking on more risk after dumping such assets last week and fleeing into gold and the yen. Last week, gold futures scored their biggest weekly gain since the 2008 financial crisis, rising 7.1%. "As of last Friday, gold had seen one of its biggest two month rallies in the last five years, hitting a high of $1,263/oz. It clearly broke a multiyear downtrend, which also came on one of the heaviest volume days in recent memory," said Jonathan Krinsky, chief market technician of MKM Partners. "This is an encouraging development for gold, but we need to see more evidence before looking for a sustainable uptrend," he added. Bullion has risen 13.5 percent year-to-date and is traditionally seen as safe haven like US Treasurys. Investors have flocked to these small pockets of safety amid Chinese growth fears, stress in the US energy sector and concerns over fragile balance sheets in European financials. Last Thursday, the precious metal jumped more than 5 percent to a one-year high, completing its best day for seven years. However, it has since fallen back to around $1,200 per troy ounce and Goldman believes that it has more room to fall. "We maintain our view of rising US rates and hence lower gold prices with a 3-month target of $1,100 (per troy ounce) and 12-month target of $1000 (per troy ounce)," the note said. "We are recommending shorting gold through a GSCI-style (Goldman Sachs Commodity Index) rolling index," it added, highlighting that traders should try to maintain a position with constant maturity. The analysts also tried to shine a light on Chinese demand for the commodity which many predict will keep a floor under the price. Goldman Sachs said that physical demand from the world's second-largest economy was mostly in jewelry form "which is residual demand that is extremely price sensitive" and suggested a price rise would lead to a sharp slowdown in demand. China will also continue to be a net seller of US Treasurys, according to the investment bank, which will further weaken bullion - which has a negative correlation with Treasury yields. The release of this analyst note was itself a reason behind gold's fall on Tuesday morning, according to commodities investor Dennis Gartman. He said he disagreed with its predictions and remained "reasonably impressed" that gold hadn't fallen further on Tuesday alongside a rally in equity markets. At the beginning of this week, though, the positive trend was broken, as jitters in the financial markets were calmed by hopes major oil producers would cut production. Oil ministers from Venezuela, Russia and Saudi Arabia met in Qatar on Tuesday to discuss a way to stabilize the volatile oil market. They agreed to freeze production at January levels, but did not agree to an outright production cut, as investors were hoping.
