Gold fell about 1 percent early on Tuesday as investors took profits from the previous session's rally to near four-month highs after President Vladimir Putin said Russia would only use military force in Ukraine as a last resort. Bullion's drop came as US equities measured by the S&P 500 index surged more than 1 percent to a record high after Putin ordered troops involved in a military exercise near the Ukrainian border back to their bases as he sought to ease tensions.
Prices of safe-haven US Treasury debt also fell following Monday's gain after escalating military tension between Russia and the West over Ukraine hammered Russian financial markets. Lingering economic uncertainty related to worries over Ukraine, however, should underpin gold prices, analysts said.
"We are seeing some profit-taking," said Eugen Weinberg, head of commodities research at Commerzbank. "Because the conflict looks like it could well last some time, gold should be well able to defend its current price level, and even gain further ground again in the short term," he said.
Spot gold fell 1 percent to $1,336.46 by 12:49 pm EST (1749 GMT), heading for its worst daily loss in more than a month since January 30. US COMEX gold futures for April delivery were down $13.40 an ounce at $1,337. Trading volume is on track to finish below its 30-day average, preliminary Reuters data showed.
The yellow metal rallied nearly 2 percent on Monday as investors, alarmed by East-West tensions, piled into bullion and government debt. Crude oil futures climbed while stock markets plunged. Those moves went into reverse on Tuesday, with US stock markets recovered lost ground and crude oil tumbled about 2 percent. Among other precious metals, silver dropped 1.1 percent to $21.15 an ounce, while platinum rose 0.7 percent at $1,464 an ounce and palladium gained 1.8 percent to $759.50 an ounce.