Gold settled lower on Monday ahead of this week's Federal Reserve meeting, with a retreat in the dollar and a softer tone to stock markets after downbeat German economic data helping the metal.
The precious metal fell 0.5 percent last week as global equities posted their biggest weekly percentage gain since July 2013, while the U.S. dollar also strengthened.
U.S. gold futures for December delivery settled down $2.50 an ounce at $1,229.30.
Spot gold was last flat at $1,225 an ounce.
Gold's outlook this week will depend largely on a Fed policy meeting, when the U.S. central bank is widely expected to end its bond-buying stimulus program, known as quantitative easing, analysts said.
The Fed's two-day meeting, which begins on Tuesday, will also be watched for clues on whether any slowdown in Europe or elsewhere could affect the central bank's monetary policy.
"The Fed is likely to end QE3, so the accompanying statement and Q&A will be as usual closely monitored," Societe Generale analyst Robin Bhar said. "Will the Fed bear any appreciation of what's going on in the euro zone and China in terms of a slowdown?"
"The Fed obviously has a mandate domestically on inflation and growth, but could it now delay a June hike because of what's going on outside the United States? That will be something to watch for... it will give gold some near-term direction."
European stocks erased early gains to ease 0.3 percent on Monday while futures on benchmark German government bonds turned higher after a key index of German business sentiment hit its lowest level in almost two years.
U.S. stocks declined, retreating after their best week this year, as the cost of crude dropped to a two-year low and investors sorted through quarterly earnings.
The dollar index fell 0.2 percent, while the euro edged up by a similar amount against the U.S. unit, after the European Central Bank's stress tests found smaller-than-expected capital requirements among European banks.