"In the short term, we are focused towards support at $1,100 and a break of this will be very bearish for the metal. As for the upside, we really need to break the level of $1,170 and $1,200," said Naeem Aslam, chief market analyst at ThinkMarkets.
The metal fell more than 8 percent in November, as U.S. Treasury yields rose after Donald Trump's election led to speculation his commitment to infrastructure spending would spur growth. It then hit a 10-month low on Dec. 15 as solid U.S. economic data gave confidence to the Federal Reserve to raise U.S. interest rates for the first time in a year. The central bank signaled three more increases next year from the previous projection of two.
"Currently there are very strong expectations of more rate hikes next year," said Jiang Shu, chief analyst, Shandong Gold Group, adding that declining gold prices have had a negative impact on the bullish sentiment in physical gold prices.
U.S. consumer confidence shot to its highest in more than 15 years in December as Americans saw more strength ahead in business conditions, stock prices and the job market following Trump's election as president in November.
The upbeat data helped underscore expectations the U.S. central bank would raise interest rates at a faster pace next year, which lowers demand for non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
The dollar index, was up 0.2 percent against a basket of six main currencies, as investors await the release of U.S. home pending sales for November at 1500 GMT.
Reflecting bearish investor sentiment, assets in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.14 percent to 823.36 tonnes on Tuesday. Holdings are down about 13 percent since the U.S. presidential elections.