Gold fell about 1 percent on Tuesday as assurances from Russia's president that military force would be a last resort in the Ukraine crisis prompted investors to take profits from the previous day's rally.
Bullion's drop came as US equities measured by the S&P 500 index surged more than 1 percent to a record high after Russian leader Vladimir Putin ordered troops involved in a military exercise near the Ukrainian border back to their bases as he sought to ease tensions.
Also read: Anand Sharma urges some easing in gold import curbs
Gold fell alongside safe-haven US Treasury debt following Monday's broad gain on escalating military tension between Russia and the West over Ukraine that hammered Russian financial markets.
Economic uncertainty related to worries over Ukraine, however, should underpin gold prices, analysts said.
"The equities look incredibly vulnerable for a pullback. All you need is an issue like Ukraine that will lead to global concerns about the economy," said Tom Power, senior commodity broker at Chicago-based RJO Futures. "I expect a lot of investor interest in gold."
Spot gold fell 0.9 percent to USD 1,337.86 by 2:10 p.m. EST (1910 GMT), its worst daily loss in more than a month since January 30.
US COMEX gold futures for April delivery settled down USD 12.40 an ounce at USD 1,337.90. Trading volume is about 10 percent below its 30-day average, preliminary Reuters data showed.
The yellow metal rallied nearly 2 percent on Monday as investors, alarmed by East-West tensions, piled into bullion and government debt.
PRIVATE INVESTORS BUY
In the retail gold market, buying among private bullion investors rebounded in February after three consecutive monthly drop, said a survey by online precious metals market BullionVault.
The Gold Investor Index, which measures the balance of customers adding to gold holdings over those reducing them, was up to 53.5 in February from 51.9 in January. A reading of 50 signals an equal number of net gold buyers and sellers.
In the physical market, 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 dropped 0.7 percent to USD 21.22 an ounce, while platinum rose 0.5 percent to USD 1,462 an ounce and palladium gained 1.9 percent to USD 760.25 an ounce.
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