Gold settled a tick lower at $1,275 on Tuesday as positive housing and consumer confidence data boosted the dollar, and as speculation that the Federal Reserve is set to wind down its monetary stimulus further weighed on prices.
The metal rose in choppy trading earlier in the day after comments on liquidity from China's central bank arrested a slide in the broader financial markets, but it underperformed other assets as concerns over Fed policy lingered.
Gold remains on track for its biggest quarterly loss in more than 30 years after the Fed gave the clearest signal yet that it plans to taper its $85 billion monthly bond-buying program.
Spot gold was down 0.3 percent at $1,277 an ounce, off an earlier low of $1,273, though it continued to underperform other precious metals, as well as oil and copper.
"Gold seems to have lost some of its bounce," said Sharps Pixley CEO Ross Norman. "You're not seeing it push back much after selling. When we do get good news, the moves are tentative.
"We've also had a raft of forecasts out today which are not good for gold," he added.
Credit Suisse cut its gold price forecast for 2013 to $1,400 an ounce from $1,580 an ounce. Deutsche Bank cut its price view by 6.8 percent to $1,428 an ounce, and Morgan Stanley reduced its forecast to $1,313 from $1,409.
(Read More: Five Reasons Gold Will Plunge Further)
"The recent increase in U.S. yields has shown that at some point in the not-too-distant future it is probable that the Fed will begin the long process of normalizing monetary policy," Credit Suisse said in a note. "In a world of higher rates, the opportunity cost of holding zero coupon gold is increasingly likely to become an issue.
"With the need for tail risk protection and the need for inflation protection substantially reduced, it remains hard to see where the marginal buyer for gold will come from," the bank said.
Banks Cut Forecasts
Dollar Climbs After US Data
The Fed's quantitative easing measures, implemented to stimulate growth, have helped drive gold to record highs in recent years by keeping interest rates low while stoking inflation fears. Paring back those measures is likely to hurt gold.
The dollar index climbed Tuesday after data showed U.S. consumer confidence has jumped to its highest level in more than five years, while sales of new single-family homes rose to an almost five-year high in May.
Investors' drive for bullion has faded, with the world's largest gold-backed exchange-traded fund—New York's SPDR Gold Trust—reporting another 4.2 ton outflow on Monday.
U.S. gold futures for August delivery were down $2 to end at $1,275.10 an ounce.