Gold prices dropped to their lowest in more than two months on Tuesday, weighed down by gains in Wall Street stocks and as outflows from physical gold funds pointed to weak investment appetite.
Bullion fell for a fourth straight day after government data showed U.S. home prices rose in February, while a report by the National Association of Realtors showed existing home sales were a bit stronger than expected.
Gold losses accelerated after prices slipped below chart support at $1,280 an ounce, triggering heavy protective stop-loss orders.
Traders said upcoming U.S. economic indicators, including new home sales on Wednesday and the durable goods orders and jobless claims on Thursday, are likely to set the tone for gold in the near term.
"If those numbers come out better than expected or show continued improvement in the U.S. economy, you should start looking at the $1,250 area as the next support level for gold," said Thomas Capalbo, precious metals trader at brokerage Newedge.
Spot gold was down 0.5 percent at $1,282.49 an ounce by 3:13 p.m. EDT (1913 GMT), having earlier hit $1,277.10, the lowest since Feb. 11.
U.S. COMEX gold futures for June delivery settled down $7.40 an ounce at $1,281.10, with trading volume about 30 percent below its 30-day average, preliminary Reuters data showed.
A better U.S. economic outlook, reflected by a six straight day of gains in the S&P 500 stock index, driven by strong corporate results, weighed on gold's appeal as a hedge.
The SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported another drop in holdings on Monday, down 3 tonnes to 792.14 tonnes.
Last week alone, fund outflows totalled 9.3 tonnes, erasing all the gains made in the year. Traders said persistent outflows from the top ETF could make any gains hard to hold.
News of ETF outflow spooked some short-term holders of gold, as many had thought the significant unwinding that characterized 2013 had come to an end, Deutsche Bank said in a note.
Among other precious metals, silver was down 0.1 percent at $19.37 an ounce. Platinum rose 0.2 percent to $1,395.50 an ounce, while palladium was up 0.6 percent at $781.33 an ounce.
Platinum group investors were digesting news that chief executives of the world's top platinum producers were to meet the leaders of the AMCU union on Tuesday for wage talks, seeking to end the longest and most costly strike at South Africa's mines in living memory.