The yellowish metal lost as much as $40 per troy ounce and was hovering about the milestone price of $1,600 in the aftermath of weekend elections in the euro zone that caused havoc, The Wall Street Journal reports.
The leaders of the region's two top economic powers – Germany and France – are projected to disagree on the best strategies to prompt growth and deal with the sovereign debt crisis. Socialist Francois Hollande prevailed over Nicolas Sarkozy in France, upsetting the nation's strong relations with German chancellor Angela Merkel.
"What we've seen in recent weeks is rallies have been increasingly weaker on the upside, and that is a warning that we are going to see another test on the downside," analyst Daniel Smith with Standard Chartered told Reuters. "Gold didn't benefit from the latest European problems and part of that is the U.S., which has been outperforming relatively speaking, so that is handing the dollar strength."
At 11:57 a.m. on Tuesday, gold futures dropped 2.27 percent, a $37.20 loss to $1,601.90 per troy ounce.