Gold fell more than 1 percent on Tuesday to a near three-week low after the Bank of Japan opted not to extend its stimulus programme, stoking speculation that the era of ultra-loose global monetary policy is coming to an end.
Gold had already been hurt by talk the U.S. Federal Reserve may be set to taper its monetary easing sooner than expected, after Standard & Poor's revised up its U.S. sovereign credit outlook on Monday and a U.S. payrolls report last week beat forecasts.
Successive rounds of stimulus measures around the world have boosted gold prices to record highs in recent years by keeping up pressure on interest rates while stoking inflation fears. Speculation they may be set to end is now pressuring the metal.
Spot gold was down 1.3 percent at $1,368.61 an ounce at 1052 GMT, while U.S. gold futures for August delivery were down $17.80 an ounce at $1,368.20.
"The market is coming around to the view that the Fed will taper quantitative easing," Societe Generale analyst Robin Bhar said. "The fact that the economy seems to be creating jobs, as we saw with the payrolls report on Friday, makes Fed tapering more likely than not."
He added, "The Bank of Japan's reluctance to further stimulate is just another reason to at least be cautious on gold."
Concerns that the era of plentiful monetary stimulus is on the wane knocked European shares nearly 2 percent to six-week lows and hit peripheral euro zone bond prices. The dollar fell against the euro.
Dealers in Singapore said gold demand had eased after a jump in April, which followed the biggest two-day fall in gold prices in 30 years. Gold bars and coins were therefore easier to obtain, they said.
GOLD ETF REPORTS INFLOW
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, reported its largest inflow in over a month on Monday, of 2.7 tonnes. Its holdings still remained near four-year lows, however, down 340 tonnes this year.
Among other precious metals, silver was down 1.5 percent at $21.58 an ounce, spot platinum was down 1.1 percent at $1,485.74 an ounce and spot palladium was down 0.9 percent at $760.75 an ounce.
Platinum producer Lonmin and South Africa's Association of Mineworkers and Construction Union (AMCU) were in talks on Tuesday to avert a strike, a union official said.
AMCU wants to be recognised as the majority union at Lonmin as it now represents over 70 percent of the workforce at the world's third-largest producer of the precious metal and has threatened to down tools at the mine this week if talks fail.
Swiss bank UBS said while platinum had been at its cheapest compared with palladium in more than a decade recently, supply threats in South Africa had more scope to drive platinum higher.
"In spite of their apparent preference for palladium this year, investors are also wary of supply risks in platinum that could easily result in sharp price spikes, especially in the next few months," it said.
"Market participants are keeping a close eye on headlines from South Africa. Tensions are increasing. Given the more acute upside risks to platinum in the near term, palladium's relative strength versus platinum should not be taken for granted."