Gold prices tumbled below $400 an ounce yesterday as nervous traders worried that the U.S. government might take steps to defend the dollar. No such moves were announced, but the dollar continued to strengthen.

The price of gold -- which rose as high as $444 a troy ounce in hectic European trading Tuesday -- fell throughout the day in Europe and closed at $404.50 in Zurich and $5401 in London, down from Tuesday's record closing figures of $438 and $424, respectively.

In later New York trading, the price reached the $400 level and dropped as low as $390 before recovering to $393.50.

The dollar, which had dropped to a record low against the West German mark early Tuesday, recovered later that day and continued to move up yesterday, largely on the strength of rumors that the U.S. government would act to bolster the currency.

"They're still looking for Washington to come out and say something good," said a New York foreign exchange dealer. There were no announcements of such action.

Gold prices had risen sharply in recent weeks, topping $300 for the first time July 18 and closing above $400 for the first time on Monday.

Also dimming some of gold's luster was a warning yesterday by Saudi Arabian Finance Minister Sheikh Mohamed Abalkhail about "instability in exchange markets coupled with high levels of inflation in industrial countries."

Abalkhail told the International Monetary Fund and World Bank annual joint Board of Governors meeting that, although Saudi Arabia always has formulated its policy with a "high priority" on international needs and requirements, it is "finding it increasingly difficult to continue (these) policies" under present conditions.

He also warned that the West must formulate long-term solutions to the energy problem. "If this fact is not fully appreciated, future difficulties will be even more pronounced than anything we have seen to date," he said.

A New York dealer said these remarks were interpreted "seriously" by foreign exchange markets to mean that OPEC countries plan "either another price increase or a production cutback or both."

The dollar, which has gained all year against the Japanese yen despite its problems against other currencies, fell back in New York after rising in bank intervened to support the yen. The dollar closed in Tokyo at 225.475 yen, up from 224.875 Tuesday, but it slipped in New York to 223.98 yen, down from 225.20 Monday.

The British pound eased in London to $2.1870 compared with $2.1885 the day before. In New York, the pound slipped to $2.1846 from $2.1980.

Late dollar rates in other European centers compared with Tuesday's late rates, were: Frankfurt, 1.7555 marks, up from 1.7530; Zurich, 1.5775 Swiss francs, up from 1.5640; Paris, 4.13375 francs, up from 4.1250; Amsterdam, 1.9470 guilders, up from 1.9445; and Milan, 808.55 lire, up from 808.50.

Late dollar rates in New York compared with Tuesday's late rates were: 1.7588 West German marks, up from 1.7369; 4.1287 French francs, up from 4.0840; 1.5770 Swiss francs, up from 1.5470; and $1.1619 Canadian, up from $1.1606. CAPTION: Picture, Trading was hectic at Hong Kong's gold and silver exchange Tuesday as the price of gold hit $421.48. AP