Gold settled below $1,300 an ounce on Tuesday, as the dollar rose and bullion investors focused on a U.S. Federal Reserve monetary policy report which showed the central bank is set to end its bond-buying stimulus by October.
The metal initially rose after Fed Chair Janet Yellen told a Senate committee that the U.S. economic recovery remains incomplete, with a still-ailing job market and stagnant wages justifying loose monetary policy for the foreseeable future.
In an accompanying report, the Fed said its balance sheet would top out at $4.5 trillion when its bond-buying program ends in October - a timeline consistent with what Fed policymakers had said previously.
"Yellen defending the current policy was expected but ultimately rates will be hiked and investors won't have reason to hold gold," said VTB Capital analyst Andrey Kryuchenkov.
for August delivery settled $9.60 lower at $1,297.10 an ounce.
Spot gold, meanwhile, was last down 1 percent at $1,293 an ounce, having earlier dropped to $1,291.70, the lowest since June 19.
The metal's losses accelerated at 11 a.m. when prices slipped below the $1,300 mark for the first time in nearly a month, and as the dollar index started to rally.
Bullion extended Monday's 2.3 percent loss, its biggest daily drop since December, as fading fears over Portugal's banking sector prompted investors to take profits, triggering stop-loss orders.
The metal had posted three consecutive weeks of gains, reaching a near four-month high of $1,345 on July 10 on increased buying after banking troubles in the euro zone periphery drove investors towards assets perceived as safer.
—By Reuters. For more information on precious metals, please click here.