Gold futures tumbled sharply on Tuesday as traders cashed in profits from the precious metals after three days of steady gains.
Other commodities posted steep losses, with oil futures down and agriculture products also trading lower. Gold for April delivery declined $15.60 at $911.10 an ounce on the New York Mercantile Exchange.
We have a sharp decline in Indian demand, while investment demand has been robust in the wake of the string of bad news from the financial world over the past two months, said Jon Nadler, senior analyst at Kitco Bullion Dealers, in a research note.
In addition, the market now has to factor in the potential net supply increase from the upcoming IMF sales and weigh it against the decline that will result from mine output losses in South Africa, Nadler said.
The G7 heads of industrial nations met over the weekend and approved gold to be sold by the International Monetary Fund. The IMF is the third largest holder of gold in reserves after the U.S. Federal Reserve and the German central bank.
Meanwhile, severe power shortages in South Africa have forced many major mining companies to cut down on production, causing gold and platinum futures to soar. South Africa is the world's second-largest gold producer and the biggest platinum producer.
Gold's decline came despite the dollar's weaker performance Tuesday versus its main rivals, but gained on the yen as risk appetite returned, while stocks gained on news of Warren Buffett's proposed buyout of bond insurers' liabilities.
The dollar index, which tracks the performance of the greenback against a basket of six major currencies, was at 76.236, down from 76.453 in late U.S. trading Monday.
Also on Nymex, platinum futures hit another peak overnight before giving up their gains. Platinum for April delivery soared as high as $1,970.90 an ounce Tuesday. The contract finished down $17.60 at $1,921.80 an ounce.
March silver lost 29.5 cents to $17.175 an ounce, while March copper added 3.5 cents $3.5620. March palladium declined $11.90 at $431.50 an ounce.
In energy markets, oil futures fell Tuesday fell for the first time in four sessions after the Energy Department cut price and demand forecasts for this year and expect an increase in oil supplies.
Light, sweet crude for March delivery fell 42 cents to $93.17 a barrel on the Nymex.