Gold prices fell 1 percent on Tuesday, retreating from the previous day's four-month high, after President Vladimir Putin ordered troops involved in a military exercise in western Russia back to base, easing fears of war in Ukraine.
The precious metal rallied nearly 2 percent on Monday as the threat of escalating tensions in Ukraine's Crimea region spurred investors to seek refuge in bullion and government debt. Crude oil futures climbed while stock markets plunged.
Those moves went into reverse early on Tuesday, with world shares and hard-hit Russian assets recovering some lost ground as immediate tensions in the East-West crisis over Ukraine abated.
There was no word, however, on Russian forces that have effectively occupied much of Crimea, and financial assets failed to retrace the entirety of the sharp moves seen globally on Monday.
Spot gold fell as low as $1,336.54 an ounce and was down 0.8 percent at $1,339.70 by 1036 GMT. U.S. gold futures for April delivery were down $10.50 an ounce at $1,339.80.
"Gold's moves are clearly headline-driven," Commerzbank analyst Daniel Briesemann said. "What we're seeing this morning is profit-taking after gold yesterday reached a four-month high on the back of increasing tensions between Russia and Ukraine."
"The conflict looks like it could well last some time, so gold should be able to defend its current price level."
Putin declared at the weekend that he had the right to invade Ukraine to protect Russian interests and citizens following months of popular unrest. Russia's Black Sea Fleet has a base in Ukraine's Crimea region.
But the military exercises in central and western Russia, which raised fears that Russia might send forces to Russian-speaking regions of east Ukraine, were completed on schedule.
Gold remains up nearly 1 percent this week, having reached its highest since Oct. 30 on Monday at $1,354.80 an ounce.
However, its gains could be vulnerable to economic data releases later this week, VTB Capital analyst Andrey Kryuchenkov said, including ADP jobs figures on Wednesday, a statement from the European Central Bank on Thursday, and U.S. nonfarm payrolls on Friday.
"Gold is a sell ahead of macro headlines this week, bar geopolitical tensions, with an overhang of speculative longs, easing physical flows and a potentially stronger dollar," he said.
CONSUMER DEMAND SOFTENING
In the physical market, dealers in Singapore noted selling, which kept premiums for gold bars unchanged at 80 cents to $1 an ounce to spot London prices.
"The current price premiums ... show that consumer demand is tapering," said Joyce Liu, investment analyst at Phillip Futures in Singapore.
Weakening differentials between 99.99 percent purity gold on the Shanghai Gold Exchange and cash gold were likely to crimp demand from China.
India's trade minister said on Tuesday he had raised the issue of easing some curbs on gold imports with the finance ministry, as the restrictions were encouraging smuggling and hurting the gems and jewellery industry.
India lost its spot as the world's biggest gold consumer to China last year, after the government imposed the restriction on imports to narrow the current account deficit.
Among other precious metals, silver was down 0.5 percent at $21.28 an ounce, while spot platinum was down 0.5 percent at $1,447.99 an ounce and spot palladium was down 0.2 percent at $744.60 an ounce.
South Africa's Association of Mineworkers and Construction Union on Tuesday lowered its wage demands for the first time, raising hopes of a breakthrough after nearly six weeks of strikes at the world's top platinum producers.