Gold hit three-month highs as escalating violence in Libya and unrest spreading across the Middle East boosted the metal's appeal as a safe haven from risk.
The retreat from risk drove down the price of copper, often viewed as a bellwether of economic health due to its expansive industrial usages, from two-week highs. World equities, measured by the MSCI All-Country World Index, fell 0.1 percent. The index gained 2.8 percent in February.
The U.S. dollar was down slightly against major currencies, while the 10-year U.S. Treasury note also was lower. U.S. stocks, which are up about 26 percent since the start of September, declined despite data showing the U.S. manufacturing sector grew in February at its fastest rate since May 2004.
Federal Reserve Chairman Ben Bernanke, in testimony to the U.S. Senate Banking Committee, said higher oil prices were unlikely to have a big impact on the U.S. economy, but could lead to weaker growth if sustained.
The Dow Jones industrial average was down 14.91 points, or 0.12 percent, at 12,211.43. The Standard & Poor's 500 Index was down 3.20 points, or 0.24 percent, at 1,324.02. The Nasdaq Composite Index was down 7.02 points, or 0.25 percent, at 2,775.25.
"If gas prices go higher that will put a damper on things," said Douglas Lane, president of the New York-based Douglas C. Lane & Associates, which has about $2.2 billion in assets under management.
"The market has been on a big upswing and there will be a correction at some point. Maybe the oil crisis will be a reason for that."
U.S. crude for delivery in April rose $1.21 to $98.18 a barrel, while Brent crude was up $1.74 at $113.54 on continued concerns about supply disruptions amid unrest in Libya.
Oil, however, remained off its highs of last week, when Brent crude traded close to $120 per barrel, its highest in more than two years, due to concerns that political upheaval in Libya would spread across oil-producing nations in the Middle East. Saudi Arabia has calmed the market with extra supply.
Spot gold rose to a session peak at $1,423.65 an ounce -- its highest since Dec. 7 when it hit a record high of $1,430.95. The metal was up 0.8 percent at $1,421.95 an ounce by 1533 GMT from $1,410.85 late in New York on Monday.
"What we're seeing in Libya, the region as a whole, makes people want to hold gold," said Robin Bhar, an analyst at Credit Agricole, adding the metal could hit a new peak "as soon as this week."
Gold in February staged its largest monthly rise since last August, as the turmoil in the Middle East fed demand for perceived safe-haven assets.
Copper traded at $9,815.50 a tonne at 1603 GMT, down from a close of $9,885 on Monday. The metal used in power and construction earlier reached a two-week high at $9,942 a tonne, nearing record peaks of $10,190 a tonne from Feb. 15.
U.S. Treasury prices on Tuesday slipped as profit-taking unwound some of the market's recent safe-haven rally.
Benchmark 10-year notes were down 8/32, their yields at 3.46 percent from 3.43 percent late on Monday.
The dollar index, which tracks the greenback's performance against a basket of major currencies, was down 0.08 percent after earlier hitting a 3-1/2-month low.
The euro gave up gains against the dollar after Bernanke noted in his remarks that downside risks to growth have declined and the risk of deflation was negligible.
Helping to support the view that China's monetary tightening was beginning to register, data out of that country showed manufacturing growth slowed in February while costs jumped. Analysts said more tightening would probably be needed to cool inflation due largely to rising oil and food prices.
In Europe, the FTSEurofirst 300 index of leading European shares was down 0.6 percent at 1,162.08. For the latest updates PRESS CTR + D or visit Stock Market news Today
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