The benchmark S&P/ASX200 index on Tuesday lost 27.1 points, or 0.3 per cent, to 8,900.6, while the broader All Ordinaries dropped 28.8 points, or 0.31 per cent, to 9,168.0.
Gold meanwhile was changing hands at $US3,558 an ounce, after spending most of August under $US3,500, and in morning trading it surpassed Monday's record to hit an all-time high of $US3,578.
NAB economist Rodrigo Catril told the bank's Morning Call podcast that the yellow metal was on the rise for a variety of reasons, including lower bond yields and a weaker US dollar.
"The tensions in Ukraine with Russia continue to escalate, so this idea of a ceasefire is also looking less likely," Mr Catril said.
"All of these components play into the appeal of gold."
Marc Jocum, Global X senior product and investment strategist, said there was increasing speculation that gold could test the $US4,000 level as early as next year, especially if the US Federal Reserve follows through with deeper rate cuts or if geopolitical tensions intensify.
The US market meanwhile was closed on Monday for the Labor Day holiday, and there were no major international news events driving markets overnight.
Eight of the ASX's 11 sectors finished lower on Tuesday, while technology and financials both gained 0.4 per cent and materials was flat.
Goldminers mostly had another good day, with Evolution rising 0.8 per cent and Ramelius Resources climbing 2.7 per cent, although Northern Star dipped 1.2 per cent.
Elsewhere in the mining sector, BHP and Rio Tinto both rose 0.4 per cent, to $42.85 per cent and $114.44, respectively, while Fortescue dropped 0.7 per cent to $18.40.
Three of the big four banks finished higher, with Commonwealth Bank growing 0.9 per cent to $170.46, NAB advancing 1.0 per cent to $42.96 and Westpac climbing 0.8 per cent to $38.57.
ANZ was the outlier, dipping 0.3 per cent to $33.48.
Collins Foods climbed 7.0 per cent to a year and a half high of $10.26 after the KFC operator announced accelerating sales growth for the first 18 weeks of 2025/26.
"Our stronger performance reflects our enhanced focus on the customer experience," said chief executive Xavier Simonet.
Woolworths dropped 3.1 per cent to $27.85, Wesfarmers retreated 2.9 per cent to $88.25 and Santos fell 1.4 per cent to $7.89 as all three stocks traded ex-dividend.
DUG Technology soared 25.3 per cent to an 11-month high of $1.98 after the seismic data platform announced a contract signing with a subsidiary of Malaysia's national energy company.
Polynovo grew 10.3 per cent to a three-month high of $1.45 after the wound care company detailed how it stood to benefit from proposed changes to US Medicare reimbursement rates.
The Australian dollar was trading for 65.39 US cents, from 65.41 US cents at 5pm on Monday.
Steven Dooley, head of market insights with cross-border payments platform Convera, said that the Aussie was in a clear uptrend, with key moving averages pointing higher.
If second-quarter gross domestic product figures, set to be released on Wednesday, come in higher than expected there was potential for the Aussie to push towards its 10-month high of 66 US cents, Mr Dooley said.
But weaker annual growth than the 1.6 per cent figure that economists are forecasting would likely push the Aussie lower while almost guaranteeing a Reserve Bank rate cut in November, he added.
ON THE ASX:
* The S&P/ASX200 dropped 27.1 points on Tuesday, or 0.3 per cent, to 8,900.6
* The broader All Ordinaries fell 28.8 points, or 0.31 per cent, to 9,168.0
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 65.39 US cents, from 65.41 US cents on Monday
* 96.77 Japanese yen, from 96.12 Japanese yen
* 55.89 euro cents, from 55.77 euro cents
* 48.35 British pence, from 48.33 British pence
* 111.11 NZ cents, from 110.95 NZ cents
9°C