Gold prices inched up on Wednesday as some investors sought refuge in the metal after the dollar weakened and global stocks tumbled on the back of rising bond yields.
World equities fell more than 1 percent to three-month lows, while the U.S. dollar index retreated from a seven-week peak hit in the previous session.
"The S&P 500 is looking very weak and negative and that is putting fear into investors," said Michael Matousek, head trader at U.S. Global Investors.
"With the markets going down people are increasing their allocation towards gold."
Gold, however, has fallen over 13 percent since hitting a peak in April, with investors increasingly opting for the safety of the greenback as the U.S.-China trade war unfolded against a backdrop of rising U.S. interest rates.
Rising bond yields have also dampened the appeal of gold, which pays no interest. Higher Treasury yields can translate into more demand for the dollar, making the bullion more expensive for holders of other currencies.
"The higher yield environment and stronger dollar are providing a toxic mix for gold," said Fawad Razaqzada, an analyst with Forex.com.
"The trend for yields has been bullish and they could rise further from here. It will be hard for gold to sustain any rallies in this environment."
U.S. Treasury yields advanced, holding near multi-year highs after government data showed the U.S. producer price index (PPI) climbed in September, which reinforced expectations that the Fed would hike interest rates at a faster pace.
"Gold prices will struggle to rebound over the remainder of 2018," said Sabrin Chowdhury, commodities analyst at Fitch Solutions.
"Strong U.S. economic growth, concurrent monetary policy normalization by the U.S. Federal Reserve and a strong dollar will all limit the attractiveness of holding gold as an investment."
The Fed increased interest rates last month for the third time this year and is widely expected to hike again in December, with no suggestion its tightening policy will cease any time soon.
Gold has held in a $34 range for the last 1-1/2 months, propped up by limited safe-haven buying at the lower end of the range, spurred by concerns over economic growth and inflationary pressure from soaring oil prices.
Analysts said the upside could be limited by waning demand due to depreciating domestic currencies in major gold-consuming countries such as India.
Spot silver fell 0.4 percent to $14.31, palladium rose 0.5 percent at $1,074.80 and platinum gained 0.1 percent to $824.60 an ounce.