By Nakul Iyer
(Reuters) - Gold prices dropped on Wednesday, having hit a near eight year-high earlier in the session, as equities gained on the back of upbeat manufacturing data and hopes of a potential COVID-19 vaccine.
Spot gold fell about 1% to $1,763.69 per ounce by 1508 GMT, having earlier hit a peak since October 2012 at $1788.96. U.S. gold futures fell 1.4% to $1,775.00 per ounce.
"A renewed sense of optimism over the U.S. economy recovering quicker than expected may fuel the risk-on mood, ultimately denting appetite for safe-haven assets including gold," said FXTM analyst Lukman Otunuga.
U.S. manufacturing activity rebounded in June, hitting its highest level in more than a year as the broader economy re-opened, bolstering the stock market.
Risk sentiment was also helped by a vaccine developed by BioNTech and Pfizer that the companies said has shown potential and was found to be well tolerated in early-stage human trials.
"Gold remains in an uptrend on the daily charts but the momentum could be running out of steam," Otunuga said adding, breakdown below $1,765 may open a path back towards $1,747 and $1,715.
The bullion surged over 13% last quarter hoisted by fears of a second wave of infections and as global central banks have bumped up stimulus measures and kept interest rates low to ease the economic blow from the pandemic.
The disagreement that governments seem to have on how to handle the potential of another potential shut-down and the strong likelihood that there will be more stimulus are likely to support gold prices, said Jeffrey Sica, founder of Circle Squared Alternative Investments.
The United States government's top infectious disease expert warned on Tuesday that infections of the coronavirus could double.
Reflecting high investor demand, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, increased by 211.9 tonnes, or nearly 22%, in the second quarter.
Palladium was down fell 1.6% to $1,899.50 per ounce, while platinum fell 1.2% to $806.70 per ounce and silver rose 1.3% to $17.90 per ounce.
(Reporting by Nakul Iyer and Eileen Soreng in Bengaluru; Editing by Marguerita Choy)