Gold fell nearly 1 percent early on Tuesday, retreating from a one-week high earlier in the session, as encouraging US housing activities stirred fears the Federal Reserve will soon decide to reduce its bond-buying stimulus program. Bullion came under pressure after data showed permits for future US home construction hit a near 5-1/2 year-high in October, and a report showed the S&P/Case Shiller composite index of home prices in 20 metropolitan areas jumped 13.3 percent in September.
The reports were the latest signs of strength in the economy, despite headwinds from rising mortgage rates and last month's partial government shutdown. "The positive building permits and Case Shiller numbers are signalling the possibility that tapering is back on the table, weighing down on the gold," said Thomas Capalbo, a precious metals broker at New York futures brokerage Newedge.
Spot gold was down 0.8 percent at $1,241.69 an ounce by 1:16 pm EST (1816 GMT), having earlier hit $1,256.49 in early trading, its highest since November 20. US gold futures outperformed spot bullion, up 50 cents to $1,241.70 an ounce. Trading volume on track to double its 30-day average of 156,000 lots, largely boosted by the December-February contract rollover ahead of the December contract's first-notice day on Friday, preliminary Reuters data showed.
Asian physical demand, which usually provides a floor to prices, has failed to pick up the way it did earlier this year when prices fell more than $200 an ounce in two days, dealers said. Outflows from gold funds continued, with SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, losing 3.30 tonnes on Monday. Outflows from the ETF, about 450 tonnes so far this year, have played a big role in denting prices. Silver fell 2.1 percent to $19.87 an ounce, having fallen to its lowest since mid-August at $19.54 in the previous session. Platinum dropped 1 percent to $1,369.75 an ounce, while palladium slipped 0.5 percent to $715.22 an ounce.