Tokyo Commodity Exchange precious metals futures may have entered a corrective phase as investors were more keen to lock in profits than take more positions, having seen the spot price break through the closely watched $500 level.
"Yen-denominated prices fell as the yen recovered slightly from near 120 (against the dollar), but sentiment stayed bullish with spot gold above $500," said Shoji Sugata, assistant manager at Mitsubishi Corp Futures Ltd.
"The market was turning a bit cautious as the pace of the rise has clearly been too fast," Sugata said. Benchmark October TOCOM gold closed at 1,938 yen per gram, down 21 yen or 1.07 percent from Monday's close of 1,959 yen.
The key gold contract had risen for 10 sessions in row until the previous day, hitting a 15-year high of 1,962 yen. October gold moved in a range of 1,934 to 1,954 yen.
Other contracts closed 5 to 23 yen lower. TOCOM prices were pressured as the yen recovered slightly against the dollar after avoiding a drop to 120 yen.
The yen was trading at 119.14/20 yen against the dollar after falling as low as around 119.94 the previous day. TOCOM precious metals found support as spot bullion and platinum surged in Asian trade.
Spot gold topped $500 an ounce for the first time since December 1987 as dealers said funds had diversified into precious metals on worries about inflation and geopolitical tensions.
Platinum breached the psychologically important level of $1,000 an ounce, hitting its highest level since 1980, as it tracked gold's gains.
Gold rose as high as $502.30 an ounce before easing to around $500 in late afternoon trade, still higher than $498.20/499.00 an ounce last quoted in New York on Monday.
Gold was trading at its highest since December 14, 1987, when it hit $502.97 an ounce. "Traders were watching see if there will be major profit-taking in the near term after it reached $500 or whether it will pick up more momentum after breaking through the key level," Mitsubishi's Sugata said.
Investors have built up positions in the last few months, lifting open interest in TOCOM gold rapidly to the highest level in more than two years as of Monday.
Open interest stood at 437,038 contracts the highest since October 2003 on Monday, up more than 45 percent from about 300,000 in October. On Tuesday's open interest will be available later in the day.
TOCOM platinum fell in line with gold, but the metal is seen supported by views that brisk global economic growth will keep demand for the metal strong.
TOCOM October platinum closed at 3,822 yen per gram, down 30 yen or 0.78 percent from Monday's close. It matched a record high of 3,855 yen reached the previous day.