Gold ended lower on Wednesday, erasing earlier when the dollar steadied after a series of U.S. economic data supported expectations the Federal Reserve will soon scale back monetary stimulus.
With the Thursday Thanksgiving holiday in the United States approaching, market activity is expected to slow and not pick up until next week, traders said.
Spot gold dropped 0.2 percent to $1,241 an ounce after rising nearly 1 percent earlier in the day. It lost nearly 1 percent in the previous session after strong U.S. housing data. settled $3.60 lower at $1,237.90 an ounce.
Technical analysts said that as long as gold remains below $1,300 it faces the risk of further declines.
The dollar edged up 0.1 percent against a basket of currencies after U.S. data showed weekly jobless claims had unexpectedly fallen.
Separately, orders for durable goods in October fell 2 percent, compared with an expected 1.9 percent decline, and U.S. consumer sentiment rose in November as wealthier Americans' outlook on the economy improved.
"Gold remains very sensitive to the U.S. data, and we saw that it cut initial gains after today's mixed numbers,'' ABN Amro analyst Georgette Boele said.
"It looks like investors are looking for reasons to push the price lower, and any bounce higher runs quickly out of steam.''
The next major data release, non-farm payroll figures, is scheduled for Dec. 6. The Fed's next policy meeting will be held Dec. 17-18.
"If the nonfarm payrolls next week come in above consensus, I think we will see lower gold prices,'' Boele said.
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