SAN FRANCISCO (MarketWatch) — Gold futures finished lower Tuesday as pressure from strength in the dollar, a rally in equities and reductions to the metal’s price forecasts outweighed earlier support from what analysts referred to as an “oversold” condition.

Gold for August delivery US:GCQ3 shed $7.80, or 0.6%, to settle at $1,379.70 an ounce on the Comex division of the New York Mercantile Exchange. It traded as low as $1,372.80 but also briefly topped $1,400 during the session, according to FactSet data.

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Tuesday marked the expiration for June gold options, likely contributing to volatility in the market. Floor trading was closed for Monday’s U.S. Memorial Day holiday.

“Talk about conflicting signals on options expiry day!” said Gene Arensberg, editor of the Got Gold Report. “Gold futures have oversold the physical bullion markets pushing up premiums for bullion and coins. At the same time, we see bearish pressure from a strong equities rally, pushing up the U.S. dollar, better-than-expected economic data and gold-price forecast reductions from some banks adding to selling pressure.”

“Advantage bears, but they are likely disappointed that gold didn’t have all that bad a day in New York considering,” he said.

Gold prices last week climbed about 1.6%, the best weekly performance since the week ended April 26, on the heels of weaker global equities and a decline in the dollar. Still, gold futures have fallen more than 6% this month.

Gold prices settled lower Tuesday as the U.S. dollar DXY, -0.05% rose against key rivals, including the Japanese yen USDJPY, +0.08% . Dollar-denominated gold and other commodities usually move lower when the dollar rises as it makes them more expensive for holders of other currencies to buy.

Arensberg pointed out that the Commitments of Traders report released Friday, covering data for the week ended Tuesday, showed a “very high combined number of gross shorts” for both large and small speculators. Shorts are essentially bets that gold will fall in price.

“But if I were short gold, I would not be very comfortable knowing that, and would want my trading stop in tight in case a short-covering rally were to get under way,” he said. A short-covering rally “could be explosive at this point.”

For at least part of Tuesday, gold looked like it was seeing more of a “corrective bounce from an oversold condition relative to the physical market,” said Arensberg. But “when the market fails to answer bearish fundamentals, it’s time to start thinking it is no longer bearish.”

Fawad Razaqzada, technical analyst at GFT Markets, also said gold has been “oversold” and was due for a bounce of some sort. “I like the fact that there’s so much negativity out there,” which makes a bounce more likely, he said.

Price forecast cuts

Gold’s close lower came as analysts at J.P. Morgan Cazenove slashed the outlook for the metal in 2013 to $1,595 an ounce from the $1,745 expected previously. In the short term, the analysts cut the gold outlook 18% to $1,450 in the second quarter, while lowering the 2015 forecast by 5% to $1,650 an ounce.

Bank of America Merrill Lynch also cut its 2013 forecast on gold by 12% to $1,478 an ounce. The analysts said “higher growth, rising nominal yields and subdued inflationary pressure have all limited investor buying.”

Even so, the B. of A. Merrill Lynch analysts also said that while the gold bull market is “pausing,” they believe the “structural rally is not broken.”

They see several scenarios that could push prices higher, including more “affluent emerging markets” possibly increasing metal purchases to the extent that gold could trade at $2,000 an ounce — “even if investors bought only a third of the gold they purchased in 2012.”

A rally in stocks in Europe and Asia on Tuesday, and sharp gains on Wall Street contributed further pressure on gold, luring investors away from the precious metal.

Metals mining shares on Tuesday afternoon, however, were mostly lower with the Philadelphia Gold and Silver Index XAU, -1.28% down 0.6%, with shares of Kinross Gold Corp. KGC, +0.21% losing more than 3%. Shares in the SPDR Gold Trust GLD, -0.54% were little changed.

Data Tuesday helped to draw more attention away from gold. The U.S. consumer-confidence index climbed to a five-year high of 76.2 in May from an upwardly revised 69.0 in April, the Conference Board said Tuesday.

Separate data showed that U.S. home-price growth was the fastest in nearly 7 years, with the S&P/Case-Shiller 20-city composite up 1.4%.

Gold futures fall on Tuesday as the dollar rises. Bloomberg News

Elsewhere in the metals market Tuesday, July silver SIN23, fell 30 cents, or 1.4%, to end at $22.19 an ounce. The J.P. Morgan analysts cut the forecast for the second quarter by 17% to $25 an ounce and lowered the full-year outlook on silver to $27.89 from $30.01.

In a note, B. of A. Merrill Lynch analysts said that while spikes on the back of technical short-covering are possible, silver looks set to average $24.40 this year, down 25% from their previous forecast.

July copper HGN23, rose 2 cents, or 0.6%, to $3.315 a pound.

June palladium futures US:PAM3 climbed $30.55, or 4.2%, to $757 an ounce, while July platinum US:PLN3 rose $9.90, or 0.7%, to $1,461.80 an ounce.

B. of A. Merrill Lynch analysts, who forecast a supply deficit in both platinum and palladium this year, said a rebound in demand from jewelers and auto-catalyst producers is likely to drive prices for the two metals in 2013.