Gold fell one percent on Tuesday after an unexpected three-day rally that saw it hurdle $1,332 an ounce and as the dollar steadied, but prices remained within reach of a 3-1/2 month high on persistent concerns over global economic growth.
Gold gained 2.9 percent in the three straight sessions following weak U.S. economic data that cast doubts over the pace of the Federal Reserve's monetary tightening.
More clues on the U.S. Federal Reserve's thinking is due on Wednesday, when it publishes the minutes of its last meeting.
Spot gold slipped 1.1 percent to $1,314.19 by 1144 GMT, having hit its highest since Oct. 31 at $1,332.10.
U.S. gold futures fell 0.3 percent to $1,314.70.
"There seems to be some profit-taking that started earlier in Asia and we can come back to some downside at support levels in the $1,308 area, between $1,290 and $1,300 and then all the way down to $1,270/$1,250, which were previously providing resistance," Societe Generale analyst Robin Bhar said.
"Obviously, we'll be watching the dollar, the FOMC (Federal Open Market Committee) tomorrow, which should however be pretty neutral and may not provide any impetus at all," he said.
The dollar rose 0.1 percent against a basket of currencies, stabilising above a six-week low after the Bank of Japan's decision to pump more stimulus into the economy hit the yen. European shares were holding just below three-week highs.
Gold is seen as an alternative to riskier assets such as stocks and is considered a haven during uncertain times. But the traditional inverse relation between the two assets has been broken recently and gold has often traded in tandem.
The metal has risen 10 percent this year, after a 28-percent drop in 2013 that snapped a 12-year run of gains.
Investors have been seeking shelter in gold on fears of slowing growth in China and as a string of U.S. data showed the world's largest economy had been hit by cold weather.
Sentiment towards the metal seems to have gathered momentum in the short term, but analysts remain cautious overall about the longer run, expecting the dollar to strenghten and the U.S. economy to recover.
"We still believe that a potentially stronger dollar and ever-volatile Fed policy expectation will pose a major hurdle to bullion's upside this year," VTB Capital analysts said.
"However, at the moment investors are calling the shots and there is no point resisting the short term uptrend until the U.S. data flow improves and investor buying stalls," they said.
CHINA BUYING SLOWS
In the physical markets, premiums of 99.99 percent purity gold on the Shanghai Gold Exchange eased to about $4 an ounce from Monday's $7 after the price rally.
World Gold Council (WGC) data showed that global gold demand fell 15 percent in 2013 as huge outflows from physically backed investment funds outweighed record consumer demand.
Indian gold consumption is expected to be 900-1,000 tonnes in 2014 on strong jewellery and investment purchases, while China's demand should be 1,000-1,100 tonnes, the WGC said.
Silver fell 1.1 percent to $21.41 an ounce, having climbed to its highest since early November at $21.96 in the previous session.
Platinum fell 0.4 percent to $1,416.00 an ounce, while palladium lost 1.3 percent to $728.80 an ounce.