Gold futures tumbled 2.4 percent in New York on Tuesday morning in a sell-off triggered by a stronger US dollar and lower oil prices, traders said.
Gold for August delivery was down $15.70 to $633 an ounce by 10:18 am EDT at the New York Mercantile Exchange's COMEX division, trading between $649.40 and $630.50.
The session low marked gold's softest price since last week's drop to a six-week low.
Futures hovered above technical support at $630 and $625, but remained capped below stiff short-term resistance at $650.
"Gold's struggled after the tough Federal Reserve talk countered very bullish news items" like tensions over Iran as well as flat equity markets, said George Gero, vice president at RBC Capital Markets Global Futures. "Today we're seeing the stop-loss selling again."
The dollar rallied Tuesday after a report that a Federal Reserve policymaker said it was safer to err on "going a little too far" in raising interest rates to fight inflation.
The comments by St. Louis Fed President William Poole, quoted in the Wall Street Journal, echoed those of Fed Chairman Ben Bernanke who triggered a rebound in the dollar on Monday after he said the Fed needed to be vigilant on inflation.
Gold trades with a tight inverse correlation to the dollar's moves.
Weak crude weighed on gold by eroding safe-haven interest, dealers said. Oil dropped $1 and broke through $72 a barrel after Iran said world powers had made positive proposals to end a crisis over its atomic program, opening the door to talks. But many market watchers sounded a bullish tone on gold's price outlook, despite the recent weakness and the dollar's moments of strength.
Citigroup said it raised its 2007 forecast for spot gold to $700 an ounce from the previous $560 prediction made in January and upped its 2008 forecast to $750 from $580.
Prudential, meanwhile, pared its gold price view for 2006 to $600, from $626 previously. COMEX gold reached its all-time high of $872 an ounce in January 1980, at a time when bullion shot to a record $850.
Spot gold dropped to $628.25/629.25 an ounce versus Monday's New York close at $643.00/644.00. Tuesday's afternoon bullion fix in London hit $627. COMEX July silver plunged 46.5 cents to $11.83 an ounce, within a $12.2950 to $11.6950 range.
Spot silver sagged at $11.86/11.96, from $12.32/12.42. It fixed at $11.87.
NYMEX July platinum fell $19.15 to $1,239 an ounce. Spot platinum sank to $1,230/38. September palladium lost $12.90 to hold at $351.10 an ounce. Spot fetched $344/350 an ounce.
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