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Gold prices fell from an overnight peak as a higher U.S. dollar overrode concerns about European political trouble. May contracts fell 0.4% to $1,298.70 a troy ounce at the Comex division of the New York Mercantile Exchange on Tuesday after peaking overnight. London gold prices were slightly higher.

Upheaval in Italian and Spanish politics initially boosted gold prices as the euro fell and traders moved to shield themselves from geopolitical uncertainty. Buying interest waned as the dollar rose.

“The stronger dollar seems to be offsetting the bullish impact coming out of Europe,” Edward Meir, a consultant at INTL FCStone, said in a note. “The sharp declines we are also seeing in most global equity markets is not helping gold much either.”

The WSJ Dollar Index, which measures the greenback against a basket of currencies, rose 0.2% to 87.54. The euro fell to its lowest level against the dollar in nearly a year. A stronger dollar makes U.S.-traded commodities more expensive for global buyers.

Italian President Sergio Mattarella on Sunday blocked the formation of a euroskeptic government. The decision fueled fears of political turmoil in Italy and broader uncertainty around the stability of the eurozone.

Adding to that were new concerns about Spanish political unity, with a confidence vote scheduled for Friday to decide the future of Prime Minister Mariano Rajoy’s center-right government. A court ruled that Mr. Rajoy’s party benefited from a bribery scheme, with jail sentences handed to dozens of Popular Party members.

Stocks in Europe and the U.S. were lower on Tuesday.

Long-term political turmoil tends to support demand for gold as a haven investment, but the impact on gold prices has so far been muted both in dollar terms and in Europe.

With gold pressured in recent months by a resurgence in the dollar, the most investors can hope for out of European political tumult is that gold holds its recent gains, said Carsten Menke, a commodities analyst at Julius Baer.

If the Federal Reserve sticks to its stated interest-rate increase cycle, the dollar may continue its rise and weigh on gold. Data from CME Group gave an 83.8% probability to the scenario of a Federal Reserve interest-rate increase at the central bank’s meeting in June.

Even if European politics remain in the headlines, there is no guarantee gold will receive a significant boost, said Erik Norland, senior economist at CME Group. “The political noise comes against a backdrop of economic calm and increasing prosperity in Europe,” said Mr. Norland.

“European unemployment is falling, and Italy and Spain are recovering as well as almost all other areas of the European economy.”

Copper prices fell, with May-dated contracts down 0.5% to $3.052 a pound.

Authorities in the Indian state of Tamil Nadu ordered the closure of a Vedanta Resources copper plant that produces roughly 400,000 tons of the base metal. That represented around 2% of global supply, analysts said. The limited price reaction, with copper futures giving back small gains, suggested some traders expected the decision to be overturned in court.

In addition, Commerzbank said in a note, the loss was unlikely to make a dent in an already oversupplied global copper market. But that could change next year. “Indian copper demand is set to grow noticeably, partly on the back of infrastructural measures,” the bank said. “Furthermore, there is no replacement for the smelter that has now been closed.”

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