Gold settled lower on Tuesday, backing away from the previous session's three-week highs as a stronger dollar and possible thawing of Middle East-West tensions quelled appetite for safe-haven assets.
A higher reading for consumer prices in the United States did not aid sentiment for gold as it did for the dollar, which rose on the view that the Federal Reserve was headed for more monetary tightening, traders said.
There was no rush to hedge in the precious metal either after weaker U.S. home construction numbers for May indicated a softer economy in general.
With less immediate concern over the situation in the Middle East, attention turned to the start of the Fed's two-day policy meeting, where it is expected to further taper U.S. bond purchases. The central bank will issue a statement on Wednesday on the outcome of the meeting.
Chart: Precious Metals
for August delivery ended $3.30 lower at $1,272.00 an ounce.
Spot gold was last down 0.1 percent at $1,270 after touching a near one-week low at $1,258.85 an ounce.
Gold hit a three-week high of $1,284.85 on Monday, reacting to violence in Iraq. Scores of Iraqis were killed on Tuesday during a battle for the provincial capital of Baquba as an uprising by Sunni insurgents continued to threaten the disintegration of Iraq. Even so, tensions between the West and Iran appeared to thaw as the Tehran discussed the Iraqi crisis with the U.S. and also aimed to end a decade-old nuclear dispute with the West.
The Consumer Price Index, the broadest inflation gauge in the United States, rose 0.4 percent in May for its biggest increase in more than a year.
U.S. housing starts for May came in 6.5 percent lower.
—By Reuters. For more information on precious metals, please click here.