Gold turned negative after U.S. economic data showed the country's economy rebounded faster than previously estimated, boosting the dollar and potentially setting the Federal Reserve on a keener path to fight inflation.
Spot gold shed 1.3% to $1,791.47 per ounce, while U.S. gold futures fell 1.4% to $1,799.4.
New claims for unemployment benefits increased less than expected last week in the United States, while the economy rebounded faster in the third quarter, rising 3.2% against the previously estimated 2.9%.
"The economic numbers we're seeing indicate that there's most likely going to be a more prolonged increase in interest rates," said Jeffrey Sica, chief executive officer of Circle Squared Alternative Investments.
The U.S. dollar index edged up making precious metals slightly more expensive for holders of other currencies.
With the Fed raising rates and gold potentially seeing inflows in early-2023 from equities on the back of safe-haven trades, "it's like driving with the brakes on - gold prices are going to move up, but not as much being that the Fed is committed to the 2% inflation target," Sica highlighted.
Gold prices are on track for a second consecutive yearly decline, with prices down more than $250 since March highs as central bankers hiked interest rates to tame inflation.
While bullion is seen as an inflation hedge, rising interest rates dent its appeal.
Spot silver fell 1.8% to $23.54 per ounce, platinum was down 2.2% to $976.54, while palladium fell nearly 1% to $1,675.65.
Independent analyst Ross Norman highlighted the issue of book-squaring ahead of year-end or early new positions being put in ahead of the new year rush.
"It would be dangerous to read too much into gold's price action just now given so many market participants are absent for the festive break... and thin markets are often prone to exaggerated moves on small volumes."