Spot gold prices ticked lower on Wednesday, touching a one-week low of $653 just after Wall Street opened.
In London, the PM Fix came in at $652.65 per ounce – down $8 from Tuesday.
The the gold market sold off after the Chinese stock market suddenly lost 6% for the day, its second-greatest one-session drop of 2007 so far.
Europe's major stock markets dropped 1% in sympathy by lunchtime, but recovered by the close. Wall Street also clawed back an initial dip.
"Gold prices will continue to correct lower in our view until either the US Dollar decline resumes in earnest or strong physical buying materializes," reckons James Steel, an analyst at HSBC in New York.
Tuesday's rally in spot gold prices gave out on news that US consumer confidence rose way ahead of expectations this month.
Minutes from the Federal Reserve's latest interest-rate policy meeting were due out at 14:00 New York time on Wednesday.
But the action in the financial markets was dominated by the sharp drop in domestic Chinese stocks.
Having just recorded a fresh all-time on Tuesday, the Shanghai & Shenzen markets sank after the Beijing authorities tripled the tax levied on share dealing in an effort to cool the bubble.
The ASX200 in Sydney dropped more than 1.1%. Tokyo's Nikkei 225 lost 0.5% for the day.
Europe's major bourses opened the day 0.7% lower.
"The decline today is 100% influenced by China," said Soichiro Monji, chief equities strategist at Daiwa in Tokyo.
"In theory it shouldn't matter if Chinese stocks plunge, but markets are at high levels and investors are very aware of the downside risk."
Mining stocks including BHP Billiton led the fall in Australia's stock market, but gold miners were little changed – a change of pattern from the previous setbacks to China's runaway equity bubble.
When the Shanghai & Shenzen exchanges dropped 10% at the end of Feb., gold bullion also sank fast in sympathy. (Get the full story here...)
At the Tocom commodities exchange in Japan, gold futures for delivery in April '08 rose 0.4% to the equivalent of $663.81 per ounce.
"For the time being, private investors are getting out of the gold market," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.
"Last Friday marked the third lower weekly close for Spot Gold," noted Christopher B. Langguth for Mitsui, "and the lowest since 16 March.
"[But] the slide is slowing and the next support is the trendline at $636.00 and the previous low, $635.20.
"There is still no reason to believe the decline is anything more than a correction." (If you'd like to take a position in physical gold bullion – starting today with a free gram of gold – click through to www.BullionVault.com now...)
For number-crunching gold traders, meantime, their busy week rolls on, meantime.
The Eurozone money supply continued to race ahead in April, said the European Central Bank (ECB) earlier this morning.
Up 10.4% in April from the same month last year, the rate of growth in broad M3 money maintained March's two-decade record.
And as FXStreet.com notes, it's holding very high above the "boundary of price stability" set by the ECB at 4.5% annual growth.
In Washington, ADP Employer Services reported that US employment in the private sector grew by 97,000 in May, way below the 145,000 forecast by a Dow Jones survey.
ADP also revised down its April report by more than 4%. That doesn't bode well for Friday's Labor Dept. report on total non-farm payrolls.
Before then, Washington will announce its final revision to US first-quarter GDP numbers. Already revised from 1.8% down to 1.3%, it's now expected to come in at just 0.7%.
How can the US economy be slowing so quickly even as the US Dollar rallies against gold and on the currency markets?