| NEW YORK
NEW YORK Gold fell on Tuesday as investors took profits after last week's gains, as the market considered the prospect of additional monetary stimulus from U.S. and European central-bank meetings this week.
Bullion was also dragged lower by sharply lower crude oil prices and by grain futures retreating from their recent record rallies due to a severe drought in the U.S. Midwest. <COM/WRAP>
Despite Tuesday's losses, the metal posted its second consecutive monthly rise after a string of weak U.S. economic indicators boosted expectations that the Federal Reserve was exploring new ways to support growth.
Last week, gold gained 2.5 percent, largely helped by European Central Bank President Mario Draghi's pledge to do whatever is necessary, within the ECB's mandate, to prop up the euro.
"Gold and the other precious metals are vulnerable to short-covering rallies, as net long positions on the Comex are at multi-year lows. Should the FOMC adopt an accommodative stance, short-covering in the gold and silver markets could be rapid, we believe," said James Steel, HSBC's metals analyst.
Spot gold was down 0.4 percent at $1,613.30 an ounce by 3:11 p.m. EDT (1911 GMT). It notched a monthly gain of around 1 percent in July.
U.S. gold futures for December delivery settled down $9.40 at $1,614.60, with trading volume about 25 percent below its 30-day average, preliminary Reuters data showed.
Both the Fed Open Market Committee (FOMC) and the European Central Bank are due to make announcements regarding their policy outlooks at the end of their meetings scheduled for this week.
Investors will be focused on the language used in the Fed Open Market Committee (FOMC) policy statement on Wednesday at the end of its two-day meeting. Recent disappointing U.S. jobs reports and other economic indicators have prompted the U.S. central bank to explore new tools to support growth.
PHYSICAL DEMAND LAGS
Interest in physical gold remains lackluster, with demand from major consumer India crimped by higher prices and the world's largest gold-backed, exchange-traded fund, SPDR Gold Trust, set for its biggest monthly outflow this year in July.
Holdings of the exchange-traded products tracked by Reuters, which include the SPDR along with funds operated by ETF Securities and Zurich Kantonal Bank, are set to decline for a third straight month in July, down around 3 tonnes.
U.S. Mint's American Eagle gold coins are also poised to log their weakest July monthly sales in five years, reflecting growing uncertainty about the future price direction of the precious metal.
In addition, much higher gold exports to Iran helped narrow Turkey's trade deficit by more than expected in June, data showed on Tuesday.
Gold sector officials have said Iranians were turning to gold for savings and possibly trade as Western sanctions tighten to force Iran to curb its nuclear program.
Among other precious metals, silver was down 0.6 percent at $27.96 an ounce, while platinum edged up 0.1 percent at $1,411.99 an ounce and spot palladium rose 0.6 percent to $586.75 an ounce.
(Additional reporting by Jan Harvey in London; Editing by Bob Burgdorfer and Leslie Gevirtz)