Gold is typically regarded as a good bet in times of financial and economic uncertainty, but traders have seen only modest demand over the past few days from investors concerned about the Greek debt crisis.
"There's always that underlying feeling that a deal will be done ... but if there was a default, that would be when gold would likely rise to its traditional role as a hedge against a worst-case scenario," ETF Securities analyst Martin Arnold said.
Greece's new offer on a reform package to avoid a default on its debts raised hopes that a tangible deal with international creditors was still possible, lifting global stock indexes, reducing investors' interest for assets perceived as safe such as gold and bonds.
Athens needs fresh funds to avoid defaulting on a $1.8 billion debt repayment to the International Monetary Fund on June 30.
Read MoreGreek gets funding lifeline; crunch talks continue
The dollar rose 0.3 percent versus a basket of leading currencies.
"(Fed Chair Janet) Yellen's comments including the need for decisive evidence, as well as the heightened uncertainty surrounding Greece, have limited the downside risk for gold in the absence of physical demand," Barclays said in a note.
Non-interest-paying gold has benefited from record low interest rates following the 2007-2009 financial crisis. Higher rates would increase the opportunity cost of holding the metal.
Read MoreWhy gold is sighing in relief
"The gold market and other financial markets already expect the coming hike in interest rates later this year, and anything else could prove to be a plus for gold," said Jeffrey Nichols, senior economic advisor to Rosland Capital, a precious metal asset firm in Los Angeles, California.
The absence of top consumer China, which is shut for a public holiday, also hurt gold prices, traders said.
Platinum fell to a fresh six-year low of $1,053.75 an ounce. Silver was up 0.8 percent at $16.19 an ounce, while palladium fell to the lowest since September 2013 at $688.25 an ounce.