Gold prices eased early on Tuesday as a rise in the dollar offset the supportive impact of concerns over Greece's future in the euro zone and fears over escalating violence in Ukraine, which hurt risk appetite. A 0.2 percent rise in the dollar against its currency basket led gold to stall after the previous day's rise, preventing a steeper recovery from Friday's three-week low.
Spot gold was down 0.4 percent at $1,233.52 an ounce at 3:18 pm EST (1618 GMT), while US gold futures for April delivery settled down $9.30 an ounce at $1,232.20. Jeffrey Lacker, a top US Federal Reserve official, told reporters on Tuesday that the central bank should raise interest rates in June. George Gero, a gold analyst at RBC Capital Markets Global Futures in New York, said speculation the Fed could raise rates, coupled with strength in stock markets, increased funds' risk appetite.
This largely overrode concerns about the economic health of the euro zone, as nervousness grew over Greece potentially withdrawing from the euro and the conflict in Ukraine mounted, weighing on global markets on Tuesday. Investors will now monitor a Greece-dominated meeting of euro zone finance ministers on Wednesday.
Euro-priced gold stood just below 1,100 an ounce on Tuesday. They hit their highest since April 2013 at 1,156.14 euros on January 26. The probability of Greece leaving the euro zone has risen several notches as Prime Minister Alexis Tsipras has taken an increasingly hard line over government debt.
European Commission President Jean-Claude Juncker told Greece not to expect the euro zone to bow to Tsipras' demands in a growing confrontation that has rattled financial markets and prompted US and Canadian pleas for calm and compromise. On the main physical markets for gold, premiums over spot prices on the Shanghai Gold Exchange contracted slightly ahead of next week's Lunar New Year holiday, MKS said in a note on Tuesday, but remained between $2.50-3.50, showing demand has emerged at lower levels. Among other precious metals, silver was down 0.6 percent at $16.91 an ounce. Platinum was down 0.5 percent at $1,207.25 an ounce, while palladium was down 1.2 percent at $767.70 an ounce.