COMEX gold sagged Tuesday morning amid speculation that US interest rates will rise soon and disappointment in the lack of follow-through safe-haven buying on instability in war-torn Iraq.
At 10:18 am EDT (1418 GMT), June gold was down $1.80 at $377.80, erasing much of Monday's $2.50 closing gain. The range so far was $376.60 to $379.90.
Investors switched from gold back into the dollar Tuesday morning after Richmond Federal Reserve President Alfred Broaddus said the upswing in core inflation in recent months has grabbed the Fed's attention.
Broaddus told the Maryland Bankers Association that the risks were still "manageable" and that the central bank will monitor price information carefully in the coming weeks. That was enough to weaken the bond market, where higher yields took away some of the allure of hard assets like gold.
Financial markets expect a Fed hike this summer to prevent the economy from overheating.
The only question is whether it comes at the Fed's June or August meeting. Housing data Tuesday were inconclusive.
Ground breaking for new homes was down 2.1 percent in April. But permits rose 1.2 percent, in a sign that builders remain confident in the economy and low mortgage rates.
Spot gold was quoted at $377.60/8.40, down from the close at $379.35/0.05. London bullion dealers fixed gold in the afternoon at $377.70.
The European Central Bank said Tuesday that a national central bank sold 34.8 tonnes of gold last week under the central bank gold agreement. COMEX July silver was up 7.0 cents at $5.745 an ounce.
It travelled in a $5.775 to $5.68 range. Spot silver was at $5.73/77, up from the close at $5.65/69. The silver fix was at $5.74.
NYMEX July platinum was down $13 at $802.00 an ounce. Spot platinum fetched $798.00/803.00. June palladium was $6 lower at $239.00 an ounce. Spot fetched $235.00/240.00.