Gold for immediate delivery fell $4.30, or 0.6 percent, to $679.50 an ounce at 4:48 p.m. London time after touching $671. Prices earlier reached $686.60, the highest since October 1980.
Gold futures for June delivery dropped $3.10, or 0.5 percent, to $681.20 an ounce on the Comex division of the New York Mercantile Exchange.
The market was supported by a weak dollar in early dealings and by active buying by Japanese investors returning after a holiday, traders said.
But prices fell back on news that Iranian President Mahmoud Ahmadinejad sent a letter to President George W. Bush, suggesting ways to ease tension over Iran's atomic program.
Gold has gained 32 percent this year due to tension in the Middle East, firm oil prices and a volatile dollar. The price has doubled in three years.
NineMSN Investor News Link