The most active gold contract for April delivery fell $31.2, or 2.52 percent, to settle at $1,208.20 per ounce, Xinhua reported.
After several weeks of weakness in the US equities, which gave support to gold, the US Dow Jones Industrial Average jumped sharply, putting pressure on the precious metal.
Analysts said that when equities post losses, the precious metal usually goes up, as investors are looking for a safe haven, while the opposite is true when US equities post gains.
Gold was put under further pressure as the US Dollar Index, a measure of the greenback against a basket of major currencies, rose by 0.29 to 96.90. Gold and the dollar typically move in opposite directions.
Investors were encouraged by gains in Chinese equities after the long Chinese New Year holiday. The Shanghai Composite Index gained 3.29 percent on Tuesday.
The precious metal got support as a report released by the New York Fed showed its Empire State Manufacturing Survey’s general business conditions index for February at negative 16.64. Analysts noted that this was worse than expected.
Gold was prevented from falling further as investors are waiting for several high-profile data releases later this week.
On Wednesday, the minutes from the previous Fed meeting are due, along with the housing starts report, producer price index, and industrial production report.
On Thursday, the weekly jobless claims are due in addition to an energy report and the Philadelphia Fed Outlook. On Friday, the consumer price index is due to be released.
Each one of these reports is likely to be watched closely by investors for indications as to the direction of the market and economy.
Silver for March delivery dropped 45.6 cents, or 2.89 percent, to close at $15.334 per ounce. Platinum for April delivery fell $20.8, or 2.17 percent, to close at $937.30 per ounce.