By Tatyana Shumsky Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Gold prices retreated Tuesday as safe-harbor demand for gold dimmed in the absence of new developments in the Middle East.
The most-actively traded contract, for April delivery, settled down $7.30, or 0.5%, at $1,427.20 per troy ounce on the Comex division of the New York Mercantile Exchange.
The thinly traded March-delivery contract slipped $7.20, or 0.5%, to $1,426.90 per troy ounce.
Simmering tensions in Libya kept gold prices supported above the $1,400-an-ounce mark. Col. Moammar Gadhafi's forces launched new attacks against rebel positions near crude oil installations Tuesday. Gadhafi has refused to step down and end the fighting despite calls from international leaders for him to resign.
Gold buyers, however, were unwilling to bid prices higher in the absence of an escalating conflict. Libya's political instability has been a boon for gold prices, which set an all-time high of $1,445.70 Monday, as investors aggressively purchased gold to guard their wealth against sudden declines in other markets.
"We put in a contract high yesterday, and you're seeing some people cashing out today," said Charles Nedoss, senior market strategist at Olympus Futures.
Weaker oil prices added negative pressure to gold. Crude oil futures stayed in negative territory throughout Tuesday on discussions of a Western military intervention in Libya and the possibility of opening U.S. strategic oil reserves.
A stronger dollar also weighed on gold prices. The greenback strengthened against the euro as concerns about European sovereign debt resurfaced, with prices of Greek government debt falling in relation to German government debt.
The euro was recently at $1.3908, down from $1.3969 late Monday.
"The dollar is rallying and crude oil is lower, and they're both indicators of lower inflation, which is bad for gold," said Nedoss.
Gold is considered a hedge against inflation, and investment demand for the yellow metal tends to slacken as inflation expectations fade
-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; firstname.lastname@example.org