Gold prices were weighed down by a stronger dollar on Tuesday, dropping for the third session, but were underpinned by geopolitical worries and uncertainty about this week's huge U.S. bond auctions.
The dollar continued its rebound from three-year lows as investors believed the currency was due an upward correction after a brutal sell-off in recent weeks.
A buoyant dollar makes commodities priced in the greenback more expensive for buyers using other currencies.
Spot gold sunk 1.23 percent at $1,329.76 an ounce by 12:54 p.m. EST. U.S. gold futures for April delivery shed 1.8 percent to $1,331.80 an ounce, posting their biggest one-day percentage fall since November 2017.
Spot gold is expected to fall to the next support level at $1,326, according to Reuters technical analyst Wang Tao.
Gold may get a boost later on Tuesday, however, when the U.S. government launches a series of auctions for $258 billion worth of debt this week.
"We have a barrage of U.S. debt being auctioned off and if there is less than the required appetite for that mountain of debt, that could weaken the dollar and support gold," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Geopolitical uncertainty ranging from disunity at the recent Munich security conference to threatened U.S. trade sanctions may increase safe haven demand for gold, he added.
"That leads me to believe that any correction in gold will continue to be a buying opportunity at this stage, with $1,322 as my target for those who are thinking of getting back into the market."
Gold investors will also be eyeing the release on Wednesday of the minutes of the U.S. Federal Reserve's Jan. 30 to 31 policy meeting.
"The key driver will be interest rate hikes ... How fast and how many times they can raise," said Helen Lau, analyst at Argonaut Securities in Hong Kong.
Higher U.S. interest rates tend to depress demand for non-interest bearing gold.
Among other precious metals, silver slipped 0.88 percent to $16.51 an ounce.
Palladium was flat at $1,033.24, after rising to the highest since Feb. 2 at $1,050 in the previous session.
Platinum fell 0.67 percent to $995.74 an ounce, after rising to a three-week high of $1,013.60 on Monday.