Gold futures proved unable to hang on to early gains, ending with a small loss as the dollar pared its decline.
Gold initially found haven-related support as global equities and Treasurys saw renewed selling pressure, analysts said. But while the U.S. dollar remained under pressure, the currency trimmed initial losses, which appeared to sap support for the metal.
Gold also moves inversely to the dollar. A cheaper greenback makes gold cheaper to buyers using other currencies and vice versa. Analysts said a prolonged stock market selloff could provide a lift for the metal, but jitters ahead of the conclusion of the Federal Reserve's policy meeting might have dented near-term enthusiasm.
"Gold is still in the same positive trend it has been in since December, but seeing as tomorrow is the Federal Reserve update, traders may not be too keen to stay long going into the meeting," said David Madden, market analyst at CMC Markets.
February gold futures GCG8, +0.23% fell $4.90, or 0.4%, to settle at $1,335.40 an ounce. March silver SIH8, +0.14% lost 7 cents, or 0.4%, to finish at $17.06 an ounce. The exchange-traded SPDR Gold Shares GLD, +0.67% declined 0.4% while the silver-focused iShares Silver Trust SLV, +1.24%was 0.3% lower.
Global equities were weaker with the Dow Jones Industrial Average sinking 400 points at its low. Treasurys remained under pressure, with the yield on the 10-year note TMUBMUSD10Y, +1.08% pushing back above 2.7%. Yields rise as debt prices fall.
Rising yields can often be seen as a negative for gold, in part because the commodity offers no yield and because rising yields can contribute to a stronger dollar. But the currency has been under pressure as yields have edged higher, further boosting demand for gold. The ICE U.S. dollar index DXY, +0.09% a measure of the U.S. currency against a basket of six major rivals, was off 0.3% at 89.07. A weaker greenback makes dollar-denominated assets more attractive.
On the economic front, the S&P/Case-Shiller 20-city index climbed a seasonally adjusted 0.7% in November, and 6.2% for the year. Consumer confidence also rose in January to 125.4 from a revised 123.1 at the end of 2017, the Conference Board said.
The Federal Reserve's rate-setting panel begins a two-day policy meeting that is expected to underline investor expectations for a March rate increase.
In other metals trade, April platinum PLJ8, +0.04% fell 1.1% to $1,001.80 an ounce, while March palladium PAH8, +0.49% declined 2.9% to $1,052.45 an ounce. March copper HGH8, +0.42% dropped 0.2% to end at $3.194 a pound.