Gold turned lower after early gains, in tandem with lower equity markets and other commodities, after Germany dampened hopes of a breakthrough in the euro zone's sovereign debt crisis.
Gold, which last week posted its biggest weekly gain in six weeks, erased early session gains after Germany's finance minister said a weekend summit of EU leaders would not produce a definitive solution. The comments pushed down the euro, global stocks and commodities in a sell-off of riskier assets.
Optimism over plans to tackle the euro zone crisis and signs of life in the US economy have helped lift the traditionally safe-haven metal to move in tandem with equities in the last several weeks. Price volatility could stay elevated due to weaker trading volume, analysts said.
"With renewed concerns that Europe will not have any progress any time soon, you are seeing investors take profits on the stock markets and that spills over to the metal markets," said Phillip Streible, a senior strategist with MF Global.
"The market has been eerily quiet for quite a long time and it's due for an explosive move."
Spot gold was down 0.4 per cent at $US1671.05 an ounce, having risen to $US1694.60 earlier in the session, its highest since September 23.
US gold futures for December delivery were down $US10.60 at $US1672.50 an ounce.
Futures trading volume has been sharply below average, signaling a lack of conviction among bullion investors fretting over the European debt situation.
Most analysts expect $US1700 an ounce to offer firm resistance and said it make take several attempts to make a decisive move above that. Support is seen at the 100-day moving average at about $US1660.
Gold will continue to be technically pressured until prices rise above key resistance of $US1700 an ounce,
Adam Sarhan, chief executive of Sarhan Capital, said there was a bearish double-top based on the two recent highs formed in late August and early September.
Silver was down 1.6 per cent at $US31.64 an ounce. Platinum rose 0.6 per cent to $US1553.25, while palladium was 0.7 per cent lower at $US615.25.
Reuters