Gold futures are weaker early Tuesday as some traders sell to exit positions and book profits, with a stronger dollar the main catalyst.
Still, the losses have been limited by the prospect of bargain hunting, particularly from traders in the physical market.
Around 9:10 a.m. EDT (1310 GMT), most-active June gold was down $6.40, or 0.55%, to $1,147.60 an ounce on the Comex division of the New York Mercantile Exchange. Nearby but lightly traded April gold fell $4.40, or 0.38%, to $1,149.10.
Most-active May silver fell 21.7 cents, or 1.18%, to $18.12.
"We have a bit of profit-taking, particularly with the dollar strengthening," said Afshin Nabavi, head of trading at MKS Finance.
The euro is down to $1.3290 from $1.3364 late Monday, hurt when a short-term Italian auction was barely covered, reminding investors about debt problems in nations beyond Greece. A stronger dollar both makes commodities more expensive in other currencies, plus takes away some of the need to buy gold as a hedge against a weaker greenback.
George Gero, vice president with RBC Capital Markets Global Futures, commented that there are a number of issues on traders' minds that could affect a willingness to take on risk, from rising Greek bond yields to a Senate subcommittee hearing Tuesday regarding Goldman Sachs, which is expected to come under attack on subprime issues.
But while softer, gold also "has not fallen out of bed," said Nabavi.
"There are some bargain hunters lined up," he said. "We haven't seen a lot of buying yet. But starting from $1,148 to $1,145, there should be some good buying. It's mainly physical guys."
Buying for the jewelry sector, in particular, tends to pick up when prices fall, and vice-versa.
The market may need to generate more upward momentum to encourage heavier investment-type buying, Nabavi added. Overall, he described gold as still confined to its recent trading range between roughly $1,145 and $1,160.
A key area farther below the market will be $1,130, Gero said. Should this ultimately fail, it could mean that sell stops - pre-placed orders activated when certain chart points are hit - are likely to be activated, Gero said.
-By Allen Sykora, Dow Jones Newswires; 541-318-8765; allen.sykora@dowjones.com
