Gold fell to a six-week low on Thursday on renewed economic worries over the euro zone, which weighed down on bullion's inflation-hedge appeal.
The metal fell around 0.5 percent after data suggested the euro zone slipped deeper than expected into recession in the last three months of 2012 after its largest economies, Germany and France, shrank late last year.
A report by trade group World Gold Council showing gold demand fell for the first time last year since 2009 also hurt bullion investor sentiment.
Bullion, used by investors as a hedge against money printing by central banks, has come under pressure on signs of recovering U.S. jobs and housing markets.
"The correlation across the asset classes have been breaking down as of late. There are lots of asset rotation and chatter about currency wars, so gold is a bit of a side show right now,'' said Axel Merk, chief investment officer of Merk Funds which manages $630 million in mutual fund assets.
Gold last dropped 0.5 percent to $1,634 an ounce, having earlier hit $1,633.19, which marked the lowest price since Jan. 4.
U.S. gold futures settled down $9.60 to $1,635.50 an ounce, with trading volume in line to finish near its 250-day average, preliminary Reuters data showed.
Global gold demand fell last year for the first time in three years, down 4 percent to 4,405 tons, as jewellery buying abated in the key Indian and Chinese markets and U.S. and European coin and bar investment dropped, the World Gold Council said in a report.
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Silver last fell 1.1 percent to about $30 an ounce, after it fell below technical support at its 200-day average.