US gold futures dropped 2 percent on Tuesday as a combination of a dollar rise, oil decline and recession concern prompted heavy selling ahead of an interest rate decision by the Federal Reserve. June contract gold on Comex division of New York Mercantile Exchange down $13.90, or 1.6 percent, at $881.60 an ounce at 10:30 am EDT (1430 GMT).
Ranged $895.80 to $876.60, just 30 cents above a three-month bottom. Gold could slip further if the US economy went deeper into a recession, which would bring commodity prices and inflation down, floor trader Jonathan Jossen said.
Gold's fundamentals remained firm but fell on Tuesday as currency traders covered short positions in the dollar and that weighed on gold, Jossen added. Investors moved to the sidelines ahead of the Federal Reserve Open Market Committee (FOMC) meeting, which will render an interest rate decision on Wednesday, dealer said.
Sell-stops accelerated losses and were not met with support due to thin buying. Gold held in StreetTRACKS Gold Shares, the world's largest gold-backed exchange-traded fund, held steady at 591.19 tonnes as of Monday after falling sharply last week, taking a toll on sentiment.
Comex estimated 9 am volume at 43,214 lots. Spot gold was quoted at $876.40/877.30, compared with $891.65/892.65 at the close Monday. July platinum was down $28.60, or 1.5 percent, at $1,950 an ounce. June palladium was down $10.80, or 2.5 percent, at $430 an ounce. May silver was down 39.8 cents, or 2.3 percent, at $16.615 an ounce, ranging from $17.035 to $16.425, near a three-month low. Spot silver was at $16.63/16.69 against Monday's late quote of $16.96/17.02.
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