Gold fell for a third straight session on Tuesday, with profit-taking driving it further off five-month highs as its safe haven appeal diminished with equity markets strengthening and the US dollar at an 11-year peak against a basket of major currencies.

Spot gold eased 0.2 per cent to $1,278.41 an ounce by 0344 GMT. The metal fell 1.6 percent in the previous two sessions, after hitting a five-month high of $1,306.20 on Thursday.

Edward Meir, an analyst with INTL FCStone, said bullion was in danger of losing the “tailwind’’ evident earlier this month.

Sharp declines in oil prices and jitters in global equity markets had helped gold gain about 9 per cent so far in January.

Bullion had also risen as investors sought safe havens due to the European Central Bank embarking on a quantitative easing campaign, printing money, and fears that the new Greek Government’s Opposition to bailout terms forced on Greece during the economic crisis could lead to more uncertainty in the euro zone.

But investors began unwinding long positions and stop-loss sell orders were triggered once they saw European equity markets were weathering the Greek election results without much disruption.

News on central bank gold purchases and inflows into the world's top gold-backed exchange-traded fund failed to lend support to the metal on Tuesday.

Russia raised its gold reserves for a ninth straight month in December as the country continued to add to the fifth-biggest gold holdings in the world, data from the International Monetary Fund showed on Tuesday.

Netherlands and Kazakhstan also added to reserves.

SPDR Gold Trust, the top gold ETF, said its holdings rose 0.24 per cent to 743.44 tonnes on Monday.

Investors were now eyeing the Federal Reserve’s two-day policy meeting that kicks off on Tuesday for clues about US monetary policy and the timing of any rate increase.

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