Wholesale market gold bullion prices dipped below $1,550 an ounce for the first time since December on Tuesday – a fall of 7% since the start of this month – before regaining some ground by lunchtime in London.
"The bear channel support had been at $1,581," say technical analysts at Scotia Mocatta, the bullion banking division of Bank of Nova Scotia.
"The next target is a full retracement to December's low of $1,522 and there does not appear to be much standing in the way."
"Gold bugs[are] hiding deep in their gold caves pondering why gold isn't rallying in spite of [the] sharp spike in risk-off sentiment," said NYU professor Nouriel Roubini on Monday via the medium of Twitter.
Asian dealers however report a pickup in physical gold bullion demand.
"At the moment supply is a bit tight for immediate delivery," one Singapore dealer tells news agency Reuters.
"Refiners can't deliver immediate gold because there's a sudden surge in demand. We're seeing demand from India, Thailand and Indonesia."
Silver bullion meantime dipped below $28 per ounce for the first time since Jan. 1 on Tuesday, before bouncing slightly, while European stock markets also regained some ground after Monday's heavy losses. Commodities were broadly flat on the day, while major government bond prices eased.
The president of Greece is today expected to ask politicians to agree to the formation of a technocrat government, as the stalemate following last week's election continues. The left-wing Syriza, which came second in the election and currently leads opinion polls, has indicated its opposition to the proposal.
"We don't want to consent to any kind of bailout policies, even if they are implemented by non-political personalities," said Panos Skourletis, spokesman for Syriza, referring to austerity measures such as public spending cuts, agreed by Greece's previous government as part of its bailout package.
Any Greek government "would have to stand by the [austerity] program," said Jean-Claude Juncker, Luxembourg prime minister and chairman of the Eurogroup of single currency finance ministers, speaking on Monday.
"If there are dramatic changes in circumstances, we wouldn’t close ourselves off to a debate over extending the deadlines."
"The Euro breakup story is gathering steam again," says Marchel Alexandrovich, London-based senior European economist at Jefferies International.
"If Greece were to ever exit the Euro, no amount of reassuring comments will convince investors that other countries won't soon follow."
Greece has meantime said it will meet €430 million in bond payments due today, Reuters reports.
Ratings agency Moody's announced Monday that it has downgraded 26 Italian financial institutions. Over in Spain, yields on 10-Year Spanish government bonds remained above 6% on Tuesday, a day after hitting their highest levels since November.
"It's looking alarming right now," says Luke Spajic, senior fund manager at world's largest bond fund Pimco.
"The market is effectively trying to price in a disorderly exit for Greece."
In contrast with Spanish bonds, yields on 10-Year German bunds sank to record lows Monday, hitting 1.43%. Germany's economy meantime grew 1.7% in the year to the first quarter of 2012 – up from 1.5% annual growth to Q4 2011 – according to provisional estimates published Tuesday.
Growth in the euro zone as a whole was flat, showing 0.0% year-on-year GDP gain in Q1 – down from 0.7% to the previous quarter – Tuesday's provisional estimates show.
Germany's Federal Court of Audit is to report to the Bundestag its objections to the way the nation's gold bullion is stored, the Wall Street Journal reports. The Court is expected to ask the Bundesbank to check that gold stored abroad is still there, the WSJ adds.
Over in India, "gold smuggling has increased drastically because of the increasing value of the metal," Indian customs commissioner PM Salim told Indian press Tuesday.
"Most of the money used in gold smuggling is hawala money," added another customs officer, referring to transfers of wealth that occur outside traditional channels so as to avoid leaving a trail. "If people buy the metal from here, they will have to show the purchase, but if gold is bought from outside, they can pay hard cash and not pay any tax to the government."
India's government has twice this year doubled the import duty on gold bullion, as well as proposing to extend gold jewelry sale taxes. The latter measure was dropped following a three-week long protest by Indian gold jewelers.