Gold slipped as the dollar firmed, cutting some safe- haven flows into bullion from the looming risk of a U.S. debt default as talks entered a critical stretch.
Spot gold was down 0.6% at $1,963.09 per ounce by 2:42 p.m. ET after rising as much as 0.5% earlier. U.S. gold futures fell 0.4% to $1,965.7.
The dollar index rose to a fresh two-month high, weighing on demand for greenback-priced bullion.
Negotiators for Democratic President Joe Biden and top congressional Republican Kevin McCarthy were set to reconvene on Wednesday morning, seeking a deal to raise the debt ceiling and avoid a catastrophic default.
"Overwhelmingly, the debt ceiling headlines are at play.... But there's some signal in the noise," said Daniel Ghali, commodity strategist at TD Securities.
Gold gained in the previous session "despite headwinds from a rising broad dollar, which reveals notable demand behind the scenes."
Wall Street's main indexes opened lower as the debt ceiling impasse kept investors on edge.
If regional U.S. banking troubles were to subside and agreement reached over the debt ceiling, gold could fall further, said Edward Gardner, commodities economist at Capital Economics.
Bullion was hovering just above 1-1/2-month lows touched last week as several Fed officials suggested the central bank would stick to its rate-hiking plan. Higher interest rates tend to increase the opportunity cost of holding non-interest-bearing gold.
Minutes of the Fed's May 2-3 meeting are due at 2 p.m. EDT, after the central bank raised its benchmark overnight interest rate by a quarter of a percentage point to the 5%-5.25% range.
Spot silver shed 1.4% to $23.083 per ounce, while platinum fell 2.2% to $1,024.72. Palladium dropped 2.3% to $1,412.691.