Gold hit a near three-week low on Tuesday, ending lower as a lack of new economic stimulus from the Bank of Japan fueled worries that other central banks may also withdraw their support, denting bullion's inflation-hedge appeal.
The precious metal was down as much as 1.4 percent after the Bank of Japan said it held off on new measures, arguing that bond markets had stabilized. Gold closed around 0.6 percent lower.
"The BoJ has given the market the impression that there will not be any more stimulus," said Carlos Perez-Santalla at brokerage Marex Spectron.
Monday's comments by St. Louis Fed President James Bullard on low U.S. inflation also weighed heavily on gold, whose prices largely depend on inflation hopes, said Perez-Santalla.
Spot gold was down 0.6 percent at $1,379 an ounce, having earlier hit $1,366.65, the lowest since May 23.
U.S. gold futures settled down $9 an ounce at $1,377, with trading volume about 35 percent below its 30-day average, preliminary Reuters data showed.
Gold had already been hurt by talk the U.S. Federal Reserve may be set to taper its monetary easing sooner than expected, after Standard & Poor's revised up the United States' credit outlook on Monday and a U.S. payrolls report last week beat forecasts.
Analysts said that the notion that the Fed will taper its bond-buying program will further pressure the price of gold, whose rally in the last several years has been driven by inflation worries due to central bank stimulus.
The BoJ news also the S&P 500 index around 0.5 percent lower, even though both equities and bullion have trimmed earlier losses.
However, the link between gold — a traditional safe haven — and U.S. equities has recently been erratic at best. The 25-day correlation-log between spot gold and the S&P was at a -0.06 on Tuesday, suggesting very weak inverse correlation.
Physical Demand Down, ETF Sees Inflow
Dealers in Singapore said gold demand had eased after a jump in April, which followed the biggest two-day fall in gold prices in 30 years.
Meanwhile, fund selling in the gold market is showing signs that it may bottom soon.
The world's largest gold-backed exchange-traded fund SPDR Gold Trust reported its largest inflow in over a month on Monday, of 2.7 tons. Its holdings remained near four-year lows, however, down 340 tons this year.