Gold ended near their lowest in seven months at just over $1,240 an ounce, pulled down by fears that encouraging economic data could prompt the U.S. Federal Reserve to raise interest rates sooner than expected.
Bullion's losses weighed on platinum and palladium for a second day, while keeping silver under the key $19 mark.
The yellow metal largely ignored geopolitical factors ahead of U.S. President Barack Obama's speech to outline a strategy against Islamic State, a group in Iraq whose savage methods have included the beheading of two American captives.
Investors were anticipating a more hawkish stance on monetary policy from the Fed's Open Market Committee (FOMC) at its next policy meeting on Sept. 16-17, after a study from the San Francisco Fed released on Monday showed that investors underestimated the speed at which the Fed might raise rates.
U.S. gold futures for December delivery settled $3.20 lower at $1,245.30 an ounce.
Spot gold hit its weakest since early June at $1,246.56 an ounce and was last down 0.5 percent at $1,250 an ounce.
Those prices were less than $10 above $1,240.69, bullion's lowest price since February.
"The strong dollar may have a further impact on gold and other commodities," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
"It does look like the market thinks an early rate hike is very likely based on economic data. The immediate support for gold is at $1,240 but it could go all the way to $1,200."
Higher rates would dim the appeal of non-interest yielding assets such as bullion.
Data on Tuesday showed that U.S. job openings held near a 13-year high in July while hiring picked up.
Easing geopolitical tensions over the Ukraine crisis also curbed some safe-haven appetite for gold. A ceasefire between Ukraine and pro-Moscow rebels was agreed on Friday, part of a peace plan meant to end a five-month conflict that has killed more than 3,000 people and caused the sharpest confrontation between Russia and the West since the Cold War.
But caution persisted as the Ukrainian military has said five of its servicemen have been killed in the past four days.
"As fragile as the truce may be, the overall sentiment appears to be satisfied that the worst of the crisis is over," Phillip Futures analyst Howie Lee said in a note.
"With a climbing dollar and the equity index showing itself to still have some gas in the tank left to continue its upward trend, investor demand for gold has been decreasing."