The precious metal rose to a peak of $1,325.90 an ounce earlier this week on concerns over escalating violence in Iraq, which drove up oil prices, and on uncertainty about the U.S. Federal Reserve's plans to taper monetary stimulus.
It has struggled to maintain gains, however, as higher prices curbed physical demand and investors stuck to the sidelines, awaiting a clearer picture for U.S. monetary policy.
Spot gold was down 0.4 percent at $1,313.90 an ounce at 1400 GMT, off an earlier low of $1,305.90, while U.S. gold futures for August delivery were down $7.20 an ounce at $1,315.40.
"Gold is currently boxed into a $1,300 to $1,330 range, with most of the activity concentrated in the middle," Saxo Bank's head of commodity research Ole Hansen said. "Bond yields have been drifting lower the last three days and that lent support."
U.S. stocks opened flat and Treasury yields fell after data showed U.S. consumer spending rose less than expected in May, which could prompt economists to temper their second-quarter growth estimates.
European stocks inched higher as traders looked past military gains by Iraqi militants and poor first-quarter growth in the United States, with some raising their forecasts for a U.S. economic bounce in coming months.
"As monetary policy starts to normalise and the search for yield starts to move towards the typical alpha assets like equities, we'd expect to see gold suffer," Mitsubishi analyst Jonathan Butler said.
CHINESE GOLD IMPORTS DROP IN MAY
Gold demand in main consumer China remains lacklustre, dealers said, with higher prices curbing some buying.
China's total gold imports from Hong Kong dropped 17 percent to 67.233 tonnes in May from 80.817 tonnes in April, according to data emailed to Reuters by the Hong Kong Census and Statistics Department.
Net gold inflows into China from Hong Kong slid to 52.606 tonnes in May from 67.040 tonnes in April, the data showed.
Analysts said a weak start to monsoon season in India could also point to a poor outlook for gold demand in the metal's second largest market.
"India's gold demand is sensitive to the intensity and timing of the yearly monsoon, as a good monsoon generally means a good harvest and increased agricultural income," HSBC said in a note.
"The majority of Indian gold purchases are made (by people working) in the agricultural sector, and a good harvest typically raises income levels and translates into greater bullion demand."
Among other precious metals, silver was down 0.1 percent at $20.96 an ounce. The metal rallied to a three-month high of $21.14 an ounce this week, outperforming gold.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, fell to its lowest since early March on Thursday at 62.86.
Spot platinum was flat at $1,464 an ounce, while spot palladium was flat at $829.78 an ounce.