"The dollar has continued to strengthen a tad and the bond yields are moving higher ahead of the auction, sapping some of the demand in the gold market," said Saxo Bank analyst Ole Hansen.
"In addition, the market is also starting to get a bit nervous because of another failed attempt to break above this key area of resistance around the $1,835 level"
The dollar index rose 0.2 per cent against its rivals, while benchmark 10-year yields jumped to a more than one-week high, increasing the opportunity cost of holding non-interest bearing bullion.
Sentiment in wider financial markets also remained upbeat, limiting inflows into safe-havens like gold.
Gold scaled a 2-1/2 month peak last week after a surprisingly soft US payrolls report boosted speculation the US Federal Reserve might push back tapering its bond purchases.
Focus now shifts to the European Central Bank's meeting on Thursday, where it is likely to debate winding back stimulus measures as the euro zone economy roars back to life.
Gold is considered a hedge against inflation and possible currency debasement as central banks pumped massive stimulus into the economy to combat the pandemic's impact.
Silver slipped 1.1 per cent to $24.39 per ounce, platinum fell 1.1 per cent to $1,008.14 and palladium dropped 0.7 per cent to $2,392.99.
"Several manufacturers had already announced that they will be able to produce fewer cars than originally planned this year. In our opinion, this should also have a negative impact on demand for platinum and palladium," Commerzbank analysts said in a note.