Gold prices fell 1 percent to a 2-1/2-week low on Tuesday, as investors focused on expectations for higher U.S. interest rates, even as U.S. stock markets swung wildly in both directions a day after the Dow and S&P 500 indexes tumbled.
Spot gold was down 1.2 percent at $1,326.51 an ounce by 4:33 p.m. EST, erasing Monday's 0.5 percent gain, having earlier dropped to $1,325.61, its lowest since Jan. 18. U.S. gold futures for April delivery settled down $7, or 0.5 percent, at $1,329.50 per ounce.
"Gold is looking at higher interest rates today," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
Strength in the U.S. dollar index weighed on gold prices earlier, when world stock markets extended their sell-off. The greenback later turned flat. A stronger dollar typically makes commodities priced in the greenback more expensive for buyers using other currencies.