Gold futures on the COMEX division of the New York Mercantile Exchange dropped sharply Tuesday to settle at their lowest level since January, as news of the inability of Greek political parties to form a coalition government roiled financial markets.

The most active gold contract for June delivery lost 34.6 U.S. dollars, or 2.16 percent, to settle at 1,604.5 dollars per ounce.

Traders' worries ignited from Greek election over the weekend were solidified overnight, as the news that Greece's two main parties had failed to form a coalition government led to a massive Wall Street selloff soon after the morning opening.

The markets seem to be eyeing eurozone's financial difficulties with alarm, and weekend elections in both Greece and France raised drastic concerns among investors worried about economic austerity measures, which France's new President Francois Hollande has promised to renegotiate with a new European Fiscal Pact.

Gold suffered with general outside market negativity, only barely recovering from trading below the 1,600-dollar-an-ounce level. The Dow Jones Industrial Average took a 198-point hit Tuesday and had recovered only around 60 points by afternoon trading. Crude oil likewise tanked to below the 97-dollar-a-barrel trading level, settling at a five-day total loss of 8.6 percent.

Previouly gold had taken some support from such economic duress as in Europe. Recently, however, the precious metal seems to have lost some of its traditional safe haven appeal as investors have increasingly preferred the U.S. dollar.

Consequently, the U.S. dollar rose sharply Tuesday in response to the European negativity, while the euro traded at times as low as 1.2981 dollars.

The Intercontinental Exchange (ICE) dollar index continued its rise to seven straight days, making it the index's longest streak since September 2008. The index measures the greenback against a basket of six other major currencies. A stronger dollar put even more pressure on gold, as it makes commodities in general more expensive for holders of other currencies.

Silver for July delivery fell 66.3 cents, or 2.2 percent, to settle at 29.459 dollars per ounce. Platinum for July delivery dropped 21.8 dollar, or 1.4 percent, to close at 1,508.3 dollars per ounce.