Gold fell for the first time in four sessions on Wednesday as the dollar strengthened against the euro and other major currencies.
Gold for June delivery fell to a low of $865.50 an ounce on the Comex division on the New York Mercantile Exchange. The precious metal closed $6.50 lower at $871.20, after climbing nearly $27, or 3.1 percent over the previous three trading sessions.
The dollar rose on speculation the Federal Reserve may raise interest rates to curb inflation. The National Association of Realtors' index which tracks sales on previously owned homes, fell 1 percent in March, and was 20.1 percent below the March 2007 level.
Gold has climbed 26 percent in the past year, reaching a record $1,033.90 an ounce on March 17, after sliding borrowing costs sent the dollar to an all-time low against the euro. The dollar rose as much as 1.1 percent today against the euro after dropping 0.7 percent in the previous two sessions.
The Fed cut interest rates 3.25 percentage points to 2 percent from September to April. The euro hit $1.6019 on April 22, the highest ever. The currency traded as low as $1.5366 today.
But with supply disruptions continuing to push oil to higher levels, gold looks set to benefit from further inflation-related hedging in the short term, while strong physical demand helps provide a strong base, said James Moore, an analyst at TheBullionDesk.com, in a research note.
Crude for June delivery traded as high as $123.75 a barrel on New York Mercantile Exchange. It closed up $1.69, or 1.4 percent, to $123.53 on continued global production concerns
Also on the Nymex, July silver fell 16 cents to close at $16.70 an ounce, and July platinum shed 80 cents to end at $1,969 an ounce.
June palladium fell $5.65 to close at $425.75 an ounce. July copper futures fell 5 cents to close at $3.83 a pound.