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Gold falls back toward 7-week lows, ends at $1,280

GP Kidd | Cultura | Getty Images

Gold fell on Tuesday after firm U.S. economic data lifted Wall Street stocks, easing back towards the seven-week low it hit in early trade after comments defending easy-money policies from Federal Reserve Chair Janet Yellen hurt the dollar.

Spot gold was down 0.4 percent at $1,278 an ounce, while U.S. gold futures for June delivery settled down $3.80 an ounce at $1,280.

Data showing U.S. manufacturing growth accelerated for a second straight month in March later sent the S&P 500 to a record intraday high on Wall Street, adding to pressure on gold.

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"That was a very good reason for gold to come off," Afshin Nabavi, head of trading at precious metals trading house MKS in Geneva, said. "Gold has not been performing at all. The Indian and Chinese lack of physical demand is not helping the market. It feels like $1,250 here we come."

The metal fell to a low of $1,278.34 an ounce in Asian trade, its weakest since mid-February, as stocks rallied on the back of Yellen's comments, which reassured investors that the Fed would maintain monetary support for the U.S. economy.

Buyers have been caught recently between the desire to take advantage of lower prices to buy gold and a lack of confidence in the outlook for the metal now that U.S. monetary policy is starting to move back to normal.

Prices plunged 28 percent last year on expectations that the Fed would taper its monthly bond-buying purchases, a major driver of higher gold prices in the wake of the financial crisis.

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