By Brijesh Patel
(Reuters) - Gold prices fell on Tuesday, retreating from a one-month high hit earlier in the session as risk sentiment improved on wider market optimism after tentative signs of progress against coronavirus outbreaks in some countries.
Spot gold lost as much as 1% and was 0.4% down at $1,654.83 an ounce by 1212 GMT, having touched a one-month high of $1,671.40.
"Risk appetite is back in the markets as new infections are declining. That's weighing on gold prices. Also higher yields are negative for gold," said Quantitative Commodity Research analyst Peter Fertig.
"However, some investors fear that monetary policy would lead to inflation. For them, buying gold at these levels remains attractive."
Cautious optimism around a slowdown in reported cases of the new coronavirus in some countries lifted European shares for a second day, even as companies continued to take steps to shore up cash after lockdowns crushed global demand.
More than 1.32 million people worldwide have been reported as infected by the virus and 74,087 have died. British Prime Minister Boris Johnson was taken into intensive care on Monday after his symptoms worsened.
The pandemic has rattled financial markets over the course of the past quarter and prompted nations to extend lockdowns to curtail its spread.
Japanese Prime Minister Shinzo Abe, poised to announce a state of emergency for Tokyo and six other prefectures, unveiled plans for a stimulus package to support the economy.
"Gold investors are revelling in the level of central bank stimulus and fiscal spending, especially when it raises government debt levels," said Stephen Innes, chief market strategist at financial services firm AxiCorp.
Indicative of sentiment, the holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.5% to 984.26 tonnes on Monday - its highest in more than three years.
U.S. gold futures rose 0.6% to $1,704.10, extending a lead over London spot prices and signalling market concern that refinery closures and logistics constraints could hamper bullion shipments to the United States to meet contract requirements.
The increase came despite measures from the CME Group's Comex Exchange to ease supply concerns and assurances from the London Bullion Market Association.
Palladium was 1.3% higher at $2,182.58 an ounce after rising more than 3% in early trading. Platinum was up 0.6% at $739.89 and silver jumped 1.3% to $15.19 after touching a more than three-week high.
(Reporting by Brijesh Patel in Bengaluru; Editing by Nick Macfie and David Goodman)