Gold price gains of more than 7% during the first quarter of 2014 were cut on the first day of Q2 Tuesday morning, with a rally from overnight lows at $1278 in the spot market fading at $1284 per ounce.
Silver tracked the gold price but with less volatility, holding around $19.80 per ounce, a 7-week low for Dollar investors when first seen last Wednesday.
"The US economy is still considerably short of the two goals assigned to the Federal Reserve," said new Fed chair Janet Yellen in a speech in Chicago late Monday.
Repeating the phrase 4 times, Yellen said "extraordinary support" is still needed from monetary policy – referring to zero rates and QE asset purchases – because "Inflation is well below 2% [and] it is [also] appropriate to continue to provide substantial help to the labor market."
[Hear More: Jim Puplava's Big Picture: Yelling Yellen and the Change in The Fed's Direction]
The US Dollar ticked lower after Yellen's speech on the forex market. That saw gold prices for Euro and UK investors slip to 8-week lows.
Australia's central bank overnight kept its key interest rate at 2.5% per year, sparking a jump in the Aussie Dollar which drove the gold price in AUD down near 2014 lows – nearly 11% beneath the 6-month high of only 2 weeks ago.
"Buying interest is starting to emerge," reckons Swiss bank and London bullion market maker UBS.
Calling the last fortnight's 8% drop a "relatively orderly correction", UBS points to "the underlying improvement in sentiment towards gold," driven by large investors wanting to diversify "and insure against tail risks."
Gaining 7.2% on the London PM Fix during the first quarter, gold prices averaged their strongest month since September in March.
Over in China – the world's largest gold consumer – spot prices for physical bullion on the Shanghai Gold Exchange today fell for the 10th day in 12 sessions, but cut their discount to international prices to $2 per ounce, the smallest discount in over a week.
China manufacturing data pulled in opposite directions Tuesday morning, with Beijing's official manufacturing PMI showing slight growth, while HSBC analysts cut their March figure to show a worsening contraction in activity.
Shanghai's stock market snapped a 4-day losing streak regardless, rallying 0.7% and helping Asian emerging-market equities reach their highest level of 2014 so far on MSCI data.
Monday's gold price drop saw the quantity of bullion held to back shares in the giant SPDR Gold Trust fund fall some 0.5%, retreating to 813 tonnes — a 3-month high when first recovered in mid-March.
