Gold dropped near its lowest level in a week on Tuesday as the dollar’s strength eroded demand on the metal as an alternative investment. While the yellow metal took advantage of the escalating geopolitical tensions in Ukraine last week, the rally in the green currency pushed prices lower. The U.S. dollar climbed to a one-year high versus a basket of major currencies, where the dollar index surged to 82.90 after touching a new peak of 82.94. Now, there are expectations the Fed would raise interest rates earlier than anticipated after the recent improvement in economic data. A report due later in the week may signal U.S. manufacturing sector held near the strongest since April 2011. Eyes will focus on the awaited nonfarm payrolls on Friday, as investors know that it is the key determinant to any change in the Fed’s monetary policy. However, before the NFP attention will shift to the ECB policy decision on Thursday amid expectations of seeing adoption of new stimulus measures to bolster recovery and stave off low inflation. On the political front, the geopolitical tensions continued in Ukraine as the government in Kiev accused Russia of "direct and undisguised aggression" that caused Kiev`s forces to suffer a further reverse in their war with pro-Moscow rebels. Gold is currently trading around $1277.61 after hitting a high of $1287.55 and a low of $1274.49. Crude oil for October’s delivery retreated for a second session to trade around $95.62 after hitting a bottom of $95.60.