Gold at three-week low as U.S. stocks, Treasury yields climb

By Marcy Nicholson

NEW YORK (Reuters) - Gold prices fell 1 percent to a three-week low on Monday, pressured by rising U.S. stocks and an agreement that averted a U.S. government shutdown, dampening demand for non-interest paying bullion.

U.S. stocks were lifted by Apple shares hitting a record high and a gauge of key world equity indexes also strengthened, while Treasury yields rose. [MKTS/GLOB]

"Risk appetite isn't collapsing here," said Bart Melek, head of commodity strategy for TD Securities in Toronto.

"Gold has been a little bit overdone here. It looks like we're just trying to trend to the 200-day moving average."

Spot gold was down 0.8 percent at $1,257.58 an ounce by 3:16 p.m. EDT (1916 GMT), after dropping to $1,253.66, the lowest since April 11 and just above the 200-day moving average at $1,251.93.

U.S. gold futures settled down 1 percent at $1,255.50.

Many financial markets in Asia and Europe were closed for the May Day holiday. Tokyo markets will be closed for three days from Wednesday for a string of holidays known as Golden Week, and many investors take additional time off.

U.S. Congressional negotiators hammered out a bipartisan agreement on a spending package to keep the federal government funded through Sept. 30, averting a government shutdown. nL1N1I302A]

Gold briefly moved higher after U.S. construction spending unexpectedly fell in March from a record high, government data showed, while the Institute for Supply Management (ISM) manufacturing employment index came in at the lowest since October.

"The current level of the ISM Manufacturing Index is still indicative of healthy growth in the sector, but it will be important to see that level hold," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto.

Traders said the market was waiting for the Federal Reserve's two-day policy meeting and the statement the central bank will issue at 2 p.m. EDT (1800 GMT) on Wednesday following the meeting. [FED/DIARY]

"We see gold maintaining a relatively higher trading range in May as tensions with North Korea will command more attention now that the bearish impact of the French election is out of the way," said INTL FCStone analyst Edward Meir.

North Korea suggested on Monday it will continue its nuclear weapons tests.

Money managers increased their net long position in COMEX gold contracts for the sixth straight week to April 25, U.S. government data showed late Friday.

Spot silver dropped 1.9 percent to $16.87 an ounce, after falling to $16.78, matching the May 10 session low.

Platinum fell 1.7 percent to $927.25 an ounce, after falling to a four-month low at $923.

Palladium was down 1.1 percent at $814.50 an ounce.

(Additional reporting by Nallur Sethuraman and Swati Verma in Bengaluru; Editing by Jeffrey Benkoe and Chizu Nomiyama)