By Arundhati Sarkar
(Reuters) - Gold retreated over 1.5% on Tuesday and is on course for its biggest intraday drop in a month, as a buoyant dollar and higher yields took the shine off the metal.
Spot gold dropped 1.6% to $1,794.57 per ounce by 1:45 pm EDT (1745 GMT), and was set for its worst day since Aug. 9.
U.S. gold futures settled 1.9% lower at $1,798.5 an ounce.
The dollar jumped 0.5% against its rivals, making gold more expensive for holders of other currencies. [USD/]
"The gold market is seeing some retracement," with the dollar likely to advance further and pressure the metals, said Daniel Pavilonis, senior market strategist at RJO Futures.
Gold scaled a 2-1/2 month peak on Friday after a surprisingly soft U.S. payrolls report boosted speculation that the U.S. Federal Reserve might push back the tapering of its bond purchases.
But "the reality is they (Fed) want to start to taper it off, so the (gold) market is going to look to position itself ahead of it actually happening," Pavilonis added.
The Federal Open Market Committee is scheduled to next meet on September 21-22.
Gold is considered a hedge against inflation and currency debasement, which is caused by massive stimulus measures.
Further denting bullion's appeal, benchmark 10-year yields also rose to their highest since mid-July, increasing the opportunity cost of holding non-interest bearing bullion.
"In addition, the market is also starting to get a bit nervous because of another failed attempt to break above this key area of resistance around the $1,835 level," said Saxo Bank analyst Ole Hansen.
Investors are also looking at the European Central Bank's meeting on Thursday, where it is likely to debate winding back stimulus measures as the euro zone economy roars back to life.
Silver slid 1.4% to $24.32 per ounce, platinum fell 2.2% to $996.48. Palladium slipped 1.5% to $2,373.68.
(Reporting by Arundhati Sarkar and Brijesh Patel in Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber)