The spot gold market ended the day in London below $650 per ounce after ticking lower all day.
Just ahead of an auction in Washington of $8 billion in new 10-year US Treasury bonds, US stocks were also lower as bond prices continued to fall, pushing yields higher along with expectations for global interest rates.
"There's a fair amount of nervousness still prevalent in the equity market as a result of US bond yields moving through 5%," said Michael James, senior trader at Wedbush Morgan in Los Angeles overnight.
The yield on 10-year US Treasury bonds was unchanged this morning at 5.17%.
The primary market's appetite for fresh US government debt today could point to global interest-rate expectations further ahead.
The bond market is approaching an attractive level to start buying again," says Michiel de Bruin, head of government bonds trading at F&C in the Netherlands.
"But given the sell-off last week, investors would rather wait for further direction from economic data.
This week's big data release for bond investors comes Friday, when US consumer price inflation for May is due from the Labor Bureau.
The CPI data could also impact gold prices. If rising inflation meets static US interest rates, gold is likely to rise as real returns on cash turn negative. (Get the full story here...)
First though, the Treasury budget deficit for May is due out at 14:00 in Washington.
Analysts expect it to show a leap to $68 billion from $43 billion in April.
To see why America's historic indebtedness only adds to the case for gold today, click here.
The Euro price of gold was little changed from Monday's start at €489.
The Sterling price of gold, however, pulled back slightly as the Pound rebounded on the currency markets.
For British investors wanting to buy gold today, physical bullion opened London just shy of £331.40 per ounce and then slipped towards £330 as the Pound rose on the currency markets.
Driven higher by a warning from Mervyn King – governor of the Bank of England – that interest rates may need to rise again to counter UK inflation, the Pound hit a two-week high against the Euro and broke above $1.9750.
Sterling had earlier slipped on the latest UK inflation data. Consumer prices rose 2.5% annualized in May, said the official statistics agency, down from a 2.8% growth rate in April.
Growth in the broad money supply is rising 14% year on year, however – and "expectations of inflation over the next year have drifted up," as Dr. King said last night.
Even with inflation lower from its March peak, a 15-year record, the real rate of interest for British savers today remains near a quarter-century low.
To read more about what the Bank of England has done for gold prices during this bull market, click here now...