Gold slid almost 2 percent in Europe on Monday as investors opted to move away from the perceived safety of bullion and load up on stocks, taking a view that the global downturn might be in the process of stabilizing.
Spot gold was quoted at $878.75/879.85 an ounce at 1234 GMT (8:34 a.m. EDT) from $892.50 late in New York on Friday.
Tentative optimism about the economy in the after-glow of last week's G20 meeting bolstered share prices and lessened the allure of gold. Global stocks as measured by MSCI's all-country index rose almost half a percent on the day.
"After the G20, people are willing to believe there's an opportunity for some green shoots of recovery and stock markets are looking buoyant as a result," said Simon Weeks, managing director of precious metals at ScotiaMocatta in London.
"You'd expect some unwinding of gold's safe haven status and a recovery in some of the other metals that had been under the cosh on the overall economic situation," he added.
Industrial commodity prices also climbed on hopes a recovery in the beleaguered economy could resuscitate demand. Base metals climbed, with copper hitting a five-month high, while oil prices gained more than $1 a barrel.
On the currency markets, the yen fell to its weakest against the dollar and euro in nearly six months.
The dollar steadied against the euro. A weaker dollar usually benefits gold, which is often bought as an alternative investment to the U.S. currency. However, the usual relationship between the two has faltered as both react to risk aversion.
OUTFLOW
Meanwhile, the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, said it recorded a small outflow on Friday from record levels.
ETFs issue securities backed by physical stocks of a precious metal. Buying by the funds has been a major element of overall gold demand in recent months as the financial crisis has fueled interest in physical assets.
The recent fall in prices has revived demand from another source, however, with Indian jewelry sales picking up ahead of the key gold-buying Akshaya Tritya festival later this month.
"The gold market is showing clear signs of improved near-term fundamentals: scrap supply is much slower since gold fell below $930/oz," UBS said in a note.
"Patchy jewelry demand was seen late last week when gold was near the week's lows; and this morning our traders report Indian clients calling to buy gold... because it is now cheap."
Among other precious metals, spot platinum eased to $1,150/1,160 an ounce from $1,154.50.
