Gold prices finished lower on Tuesday, failing to find support from the recent plunge in the U.S. stock market as equities tried to bounce back and the dollar held relatively steady.
April gold GCJ8, +0.30% fell $7, or 0.5%, to $1,329.50 an ounce, after a modest decline Monday. Prices had earlier climbed to as high as $1,349.30.
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"Gold isn't guaranteed to rise when equities fall. Indeed, it may drop amid a severe crash if fund managers sell to cover losses on other assets," said Adrian Ash, director of research at BullionVault.
"But that is part of gold's role as insurance, because it offers a deep and uniquely liquid market of diverse buyers, from microchip makers to Chinese households celebrating New Year as well as investors," he said.
U.S. stocks eventually headed higher Tuesday in volatile trading, with the Dow Jones Industrial Average up trading little changed in recent action, after ending Monday with a more than 1,100-point loss-the largest on-day point drop in history.
Against this backdrop, "gold isn't acting like a haven because there is no real panic in the market," said Naeem Aslam, chief market analyst at ThinkMarkets.
"In a textbook trade, if there was a real panic in the market, we should see a massive spike in the gold price, but there is nothing like that in the market," he said. The U.S. Federal Reserve is "going to adopt a more aggressive stance towards their monetary policy and this is keeping traders away from gold."
Strength in the dollar also pressured dollar-priced gold. The ICE Dollar Index DXY, -0.12% was flat at 89.60, up less than 0.1%, after hitting three-year lows last week.
The yield on 10-year Treasury notes TMUBMUSD10Y, -0.74% traded at 2.777%, compared with 2.794% on Monday afternoon in New York. The benchmark yield had risen to a four-year high of 2.883% at one point on Monday.
The 10-year yield has been trading around levels last seen four years ago, after Friday's monthly jobs report revealed a jump in wage growth. That stoked inflation fears and, in turn, concerns that the Fed will increase interest rates faster than expected. Analysts have stressed that while inflation risk drives up bond yields in a way that could prove negative for nonyielding bullion, it also restores investor faith in gold as a hedge.
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Meanwhile, March silver SIH8, +0.23% shed 9.1 cents, or 0.5%, to $16.58 an ounce. The exchange-traded SPDR Gold Shares GLD, -0.47% was down 0.7%, while the silver-focused iShares Silver Trust SLV, -1.53% fell 0.4%.
March copper HGH8, +0.55% fell 3.2 cents, or 1%, to $3.189 a pound. April platinum PLJ8, +0.18% lost $1.20, or 0.1%, at $994.30 an ounce. Palladium's March contract PAH8, -0.13% fell $30.45, or 2.9%, to $1,002.50 an ounce.
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-Mark DeCambre contributed to this article