Gold settled below $1,600 an ounce on Thursday, as banks reopened in Cyprus for the first time in two weeks without signs of panic withdrawals, sapping demand for low-risk assets.
Gold hit a one-month high of $1,616.36 last week on concerns the $10 billion euro rescue deal for Cyprus, which will leave big depositors and private bondholders with huge losses, could become a template for future bank bailouts in the euro zone.
But a widespread perception that the Cypriot crisis would be contained put the metal on track for its second quarterly decline in a row and analysts were now anticipating sideways trading ahead of the Easter holiday break.
(Read More: Cyprus Bailout Won't Be Euro Zone's Last: Poll)
Gold was down 0.6 percent to $1,595 an ounce. Spot prices were still set for a 1.1 percent gain in March, their first monthly rise in six months. U.S. gold futures settled down $11.50 at $1,595.70 an ounce.
In euro terms, gold was headed for a monthly gain of around three percent, its best monthly performance since July, having peaked on Wednesday at its highest since Jan. 24 at 1,260.06 euros.
"Prices are likely to stay depressed in coming sessions as the situation in Cyprus is expected to slowly get better," Canaccord Genuity analyst Dmitry Kalachev said. "But the downside may be temporary and although risks of contagion from Cyprus are limited, uncertainty remains around other periphery countries in the euro zone."
Major stock markets recovered and the euro edged off a four-month low against the dollar on the news Cypriots queued calmly at banks as they reopened under tight controls imposed on transactions to prevent a run on deposits.
Although European leaders said the bailout, agreed in Brussels on Monday, averted a chaotic national bankruptcy that might have forced Cyprus out of the euro, the deal looks set to push the country deeper into an economic slump.
Reflecting the stalled momentum in gold, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at 1,221.260 tons for the fourth session on March 27.
The fund, which accounts for around 40 percent of total ETF holdings, was however set for its biggest quarterly outflow since inception.
In the short term, gold is likely to remain supported by comments from top Federal Reserve officials, reiterating that the U.S. central bank would do best to keep buying assets at its current $85-billion-a-month pace until the jobs market is on firmer ground.
(Read More: Monetary Policy Is Not Loose Enough: Fed Official)
Fears that printing money to buy assets will stoke inflation have been a key driver in boosting gold, sending prices to an 11-month high last October after the Fed announced its third round of aggressive economic stimulus.
The physical market was mostly subdued as jewellers and speculators stayed on the sidelines ahead of the Easter holiday, keeping premiums in Hong Kong and Singapore unchanged at between $1.20 and $1.50 an ounce to the spot London prices.
Liquidity should return next week, when an European Central Bank policy meeting and U.S. non-farm payrolls will be the main economic events.
In other precious metals, spot silver last lost 0.9 percent to $28 an ounce.