Gold ended modestly lower on Tuesday, surrendering early gains as weak physical demand made investors wary about the outlook, though tensions in Ukraine and a slide in the dollar index to 6-1/2 month lows lent some support.
The metal bounced back above the key chart level of $1,300 an ounce late last week as escalating tensions in Ukraine outweighed the impact of strong U.S. jobs data.
for June delivery ended 70 cents lower at $1,308.60 an ounce. Meanwhile, spot gold dropped 0.1 percent to $1,308 an ounce, having earlier risen as high as $1,314.10.
Chart: Precious Metals
"We think the move above $1,300 is not sustainable, because it seems to be predominantly driven by speculation," Commerzbank analyst Daniel Briesemann said. "Physical demand seems to be somewhat muted. We've seen significant ETF outflows in the last couple of weeks and muted coin sales in the United States."
He added, "We're seeing some more shaky hands in the market, and once they decide to take profits or that it's time to get out, prices will probably come under pressure."
Outflows from the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, totalled nearly 10 tons last week.
Prices got some support from the drop in the dollar index.
A lack of conviction that the U.S. Federal Reserve will follow a reduction this year of its emergency money-printing with an actual rise in interest rates is at the heart of the dollar's weakness, analysts said. That also bodes well for gold, which benefits from a low interest rate environment.
Demand in Asia was soft overnight, precious metals house MKS said in a note, with Japan, Hong Kong and South Korea all absent for public holidays.
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