Gold hit a two-and-a-half-week low on Monday as the dollar rose ahead of a two-day Federal Reserve meeting and as global equities surged.
The dollar hit an eight-week high against the yen as data showing a pick-up in U.S. consumer prices increased bets that the Fed could raise interest rates again in December.
Investors also expect the Fed will announce plans to start trimming its balance sheet at its meeting on Tuesday and Wednesday in a move that should support the dollar and weigh on dollar-priced gold.
World stocks hit a record high ahead of the Fed meeting, with investors favouring risky assets ahead of perceived safe havens such as gold.
Spot gold was down 0.4 percent at $1,313.58 an ounce by 1149 GMT, having earlier touched $1,312.03, its lowest since Aug. 31.
U.S. gold futures for December delivery fell 0.6 percent to $1,317.20.
"Gold could fall below $1,300 in the short term, but the question remains how people perceive the U.S. economy and the need for higher interest rates," said Ole Hansen, head of commodity strategy at Saxo Bank.
"At this stage there`s still not a strong view the U.S. economy will accelerate. That should keep interest rates at a manageable level and provide some support for gold."
Persistently subdued inflation despite a pick-up in global growth remains the "trillion dollar" question for central banks looking to normalise policy, the Bank for International Settlements said on Sunday.
Investors currently put a December rate hike at less than a 50 percent probability in the futures market.
On the political front, investors largely brushed aside concerns after a relatively quiet weekend on the Korean peninsula.
U.S. Ambassador to the United Nations Nikki Haley said on Sunday that the U.N. Security Council has run out of options on containing North Korea`s nuclear programme and the U.S. may have to turn the matter over to the Pentagon.
An address by U.S. President Donald Trump to world leaders at the United Nations on Tuesday could put North Korea tensions back in focus.
Elsewhere, data showed that speculators raised their net long position in COMEX gold contracts for the ninth straight week, bringing it to a one-year high in the week to Sept. 12 and leaving gold vulnerable to profit-taking.
Silver slipped 0.8 percent to $17.47 an ounce after touching its lowest since Sept. 1.
Platinum rose 0.2 percent to $966, while palladium gained 0.7 percent to $929.70.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)