Gold fell 2.7 percent on Tuesday as a rising dollar prompted investors to take profits from the metal's 28-year highs, but analysts said the upward trend remained intact.
Platinum also lost steam after a fund-driven rally, with prices falling more than 3 percent after rising up to $1,391 an ounce on Monday, just $4 away from an all-time high.
Spot gold dropped to $726.90 before rising to $728.50/729.30 an ounce by 1431 GMT, against $746.80/747.60 in New York late on Monday, when it rose up to $747.65 -- the highest since January 1980.
The dollar has strengthened marginally and it's an illustration to me of how dependent on the dollar this bull market is, said Stephen Briggs, economist at SG Corporate ad Investment Banking.
It was obviously going to be vulnerable to something like this because we haven't really had a correction in gold on the way up. You can go down a lot further without seriously damaging the trend that we (have) had in place for several weeks now.
Gold has jumped 17 percent, or over $100, since falling to $641.10 in mid-August. It surged on record-high oil, tensions in the Middle East, investor demand through exchange-traded funds and the Federal Reserve's move to cut interest rates.
The dollar rose from record lows in the previous session as investors trimmed overstretched bets against the U.S. currency ahead of key data, including the Institute for Supply Management's non-manufacturing index on Wednesday and non-farm payrolls on Friday.
I would characterize it as a healthy liquidation. Short term, I think we have good support at $720 and at that point, we would expect some reasonable demand from India to emerge, said a precious metals analyst in London.
India is the world's largest gold consumer.
High prices hit physical demand in key markets, with the volume of Abu Dhabi's gold sales falling 20 percent in September, and 10 percent in the third quarter.
Gold imports into Turkey, one of the top three consumers of the metal, fell 49 percent to 13.6 tones in September from a year earlier, but total imports in the first nine months of 2007 were up 24.3 percent at 191.8 tones.
In other bullion markets, benchmark August futures in Tokyo ended 25 yen per gram lower at 2,761, having reached an intraday high of 2,804 yen -- the highest for any benchmark since April 1985. U.S. futures also sharply fell, with the most active December gold sinking $18.9 to $735.20 an ounce.
Platinum fell to $1,347 an ounce before rising to $1,353/1,357, against $1,390.70/1,397.70 in New York.
The most active platinum contract in Tokyo, August 2008, tumbled and ended by the 100-yen daily limit at 4,978 yen a gram on technical selling and weakness in the spot market.
Japan's Mazda Motor Corp said on Monday it had developed the world's first catalyst for cars that employs single-nanotechnology to create a material structure that slashes platinum and palladium use by 70 to 90 percent.
Spot palladium dipped to $350/353 an ounce from $354.80/358.80. Silver tumbled to $13.17/13.22 an ounce, against $13.71/13.76 late in New York.
(Additional reporting by Lewa Pardomuan in Singapore)