Gold closed about $2 lower on Thursday as uncertainty in Greece after the European Central Bank said it would no longer accept Greek bonds in return for funding left investors on the sidelines.
The ECB's announcement dealt a blow to Athens which is seeking debt relief from euro zone lenders, knocking the euro down against the dollar in early trade.
Spot gold was last down 0.5 percent to $1,264 an ounce. U.S. gold futures for April delivery settled down $1.80, at $1,262.70 an ounce.
"Like in 2014, we had a phenomenal start of the year, up 8 percent in January, so inevitably we are going to see a bit of profit-taking," broker Sharps Pixley CEO Ross Norman said.
"We seem to be constantly relying on a new level of economic prices or another 'Grexit' story or euro deflation to get ourselves into a higher trading range and those things are difficult to predict."
Bullion failed to capitalize on a fall in European equities, while it extended losses after an upbeat report on the labour market lifted U.S. stock prices.
The metal dipped despite the euro staging a rebound against the dollar after positive German data.
"For the (gold) market to really care about what is happening in the euro zone we need to be closer to an exit of Greece than we have been in the past," Julius Baer analyst Carsten Menke said.
"You need to have a pretty dire assessment of the future and see the situation in the euro zone deteriorate to attract back those long-term investors who have exited gold in the past two years."
China's move on Wednesday to cut the reserve requirement for banks in an effort to add more liquidity to fight off an economic slowdown and looming deflation could however support demand for gold in the short term.
The metal has in the past benefited during periods of ultra-low interest rates and further monetary easing, which encourage investors to put money into non-interest-bearing assets.
But while major economies such as China and Europe continue to pump more money into their systems, the United States is moving towards a tightening cycle.
And investors will watch Friday's U.S. non-farm payrolls for more clues on when U.S. interest rates would rise this year, the first hike in nearly a decade. A Reuters poll of analysts had forecast a 230,000 increase in U.S. jobs in January, slowing slightly from 252,000 in December but still robust.