Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.
The metal has risen more than 7 percent since dropping to its lowest in more than 10-1/2 months in December, though it has failed to break above a key level in recent days.
"Gold has dropped back from quite a significant technical level around $1,220, a critical retracement of last year's high to low move. I would say from here the risks are skewed to the downside in the short term," Mitsubishi's Butler said.
In other precious metals, spot silver was up 0.87 percent at $17.15 an ounce.
Spot platinum rose 2.78 percent to $983 after touching a low of $943.75 in the previous session, its worst since Jan. 5.
The decline in diesel vehicles in Europe is a threat to platinium prices, Macquarie said in a note.
"In 2017, if the European (auto) market grows at the 2-3 percent rate our research group expects, a similar market share decline for diesel will mean falling sales and a hit to platinum demand of something like 35,000 oz."
Spot palladium gained 4.28 percent to $785.72.
— CNBC's Jacob Pramuk contributed to this report