The prices of gold eased back to $1330 per ounce Tuesday morning in London, dropping 0.7% from Monday's 5-week highs as commodities slipped with major government bond prices.
Asian stock markets rose as the Japanese Yen edged lower. European stocks and US equity futures crept 0.2% higher.
"We believe there is a strong element of short covering behind the recent buying in gold," says one broker's note, pointing to the record-large number of bearish bets held by speculative traders in gold futures.
"Precious metals are looking heavy," says Standard Bank's commodity team in London, saying that gold prices are "sitting on support at $1330."
Gold demand in China - the world's No.2 consumer nation - eased off Tuesday, with premiums for 0.995 fine gold bars traded in Shanghai slipping to $20 per ounce above benchmark London prices, down from $37 a fortnight ago.
Monday saw new gold bullion import rules in India, with the Reserve Bank demanding that importers set aside one-fifth of new shipments for re-export.
India's Rupee rallied from record lows, widely blamed on the country's widening current account deficit.
Gold imports will fall nearly two-thirds in July-December from 2012, reckons the All India Gems & Jewellery Trade Federation. But "this is an overly pessimistic appraisal," says Commerzbank, "probably aimed at encouraging the Indian central bank and government to loosen the restrictions."
The central bank of world No.4 gold consumer Turkey meantime raised interest rates on overnight loans by 0.25% on Tuesday.
The Turkish Lira rose from its weakest level to the US Dollar since the revaluation of 2005 knocked 6 zeroes from the currency.
Rising 12% from June 28th, US gold prices have now beaten the average 1-month gold rally of the last 45 years following drops as bad or worse than April-June 2013.
Speaking Monday to CNBC, "Gold wants to go higher," reckons Dennis Gartman, "probably predicated on a continued expectation that the Fed will continue to expand reserves, and so shall too other central banks."
The US Federal Reserve meets Tuesday and Wednesday next week to set policy until September.
"You don't sell backwardations in any market," adds Gartman – who said gold was "going lower" on June 24th, but said it was "time to go to the sidelines" 4 days later when gold bottomed at $1181 - "and you specifically don't sell backwardation in the gold market."
Backwardation is when prices for nearer-term delivery are more expensive than future settlement – a rare situation in gold, which incurs storage costs and lost interest on cash over time.
That creates what's called "contango", with prices rising the further ahead settlement is scheduled.
"[But] I complain about the current claims of backwardation in gold," counters Nick Laird of gold-chart site ShareLynx, "[because] the spread between the Last/Near Future needs to go below zero for a full inversion.
"In gold there is little to see except the first couple of months dipping."July gold futures settled Monday at $1336.40 per ounce, 40 cent above the August contract, equal to September, and below all other contract prices.
"After falling sharply in June on a re-pricing of Fed easing policies, gold prices have [only] stabilized in July," reckons analysis from investment bank Goldman Sachs.
Holding its 12-month forecast for the gold price at $1175 per ounce – the 3-year low hit at the end of June – "medium term we expect that gold prices will decline further given our US economists' forecast for improving economic activity and a less accommodative monetary policy stance."
Ending QE and raising rates "is simply a reversal of the process that drove up gold prices from the end of 2008 to mid-2011," says commodities analyst Gary Clark at Roubini Global Economics.
"Investors piled into gold ETFs under precisely the opposite conditions: falling real [interest] rates and rising tail risk."
US Treasury yields rose Tuesday as gold prices slipped, rising to a 3-session high of 2.52%.
Inflation was last pegged on the official US Consumer Price Index at 1.8%.
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