Gold prices turned negative on Wednesday, erasing gains made on weak U.S. economic data yet staying above the $1,900 level, as key members of the Federal Reserve signaled their intent to keep pushing interest rates higher to combat inflation.
The dollar pared losses from near multi-month lows and held steady, making gold less attractive for other currency holders.
Spot gold fell 0.2% to $1,904.84 per ounce by 1:45 p.m. ET, after hitting a session low of $1,896.32 earlier.
U.S. gold futures settled down 0.2% at $1,907.
"We're due for a bigger correction here," said Daniel Pavilonis, senior market strategist at RJO Futures.
"We've seen a sharp selloff in 10-year yields - from just shy of 4% down to 3%. At the same time, we've seen a sharp rally in the metals. I just think we're going to see a retracement of that rally... gold could sell off maybe $150 from here and again become a buying opportunity."
Bank of St. Louis President James Bullard in a Wall Street Journal interview said policy rates should be moved to above 5% "as quickly as we can," while Cleveland Fed President Loretta Mester echoed similar sentiments.
Traders' bets, however, were at 91.6% for a 25-basis point rate hike by the Fed in February.
Lower interest rates tend to be beneficial for bullion, decreasing the opportunity cost of holding the non-yielding asset.
Earlier in the day, U.S. producer prices fell more than expected in December as the costs of energy products and food declined, offering evidence that inflation was slowing.
"Recession worries and the Fed's policy decision would be the major catalysts for prices in the near future," said Hareesh V, head of commodity research at Geojit Financial Services.
Spot silver fell 1.6% to $23.55 per ounce, platinum gained 0.2% to $1,041.25 while palladium dipped 2% to $1,708.59.