Gold prices steadied after dropping to a 2-1/2-year low on Monday as the dollar rally took a breather, while analysts expected a further drop in prices with more interest rate hikes by the U.S. Federal Reserve looming.
Spot gold was little changed at $1,645.47 per ounce as of 0724 GMT. Prices fell as much as 1% earlier in the session to hit $1,626.41, their lowest level since April 2020.
U.S. gold futures fell 0.4% to $1,648.70.
The dollar index, which gauges the greenback versus six peers, was flat after scaling a fresh peak since 2002 boosted by a plunge in British sterling.
"I expect prices to continue this mild weakness with U.S. interest rates expected to rise in coming quarters and also many investors are shifting their focus to safe-havens like the dollar rather than gold," said Hareesh V, head of commodity research at Geojit Financial Services.
"An increase in physical demand from India could provide slight support but I don't see a major rally happening in coming days."
The U.S. central bank and a number of other major central banks raised interest rates last week, triggering concerns over the impact on growth.
A survey showed on Friday a downturn in business activity across the euro zone deepened in September.
Higher U.S. interest rates dull the zero-yielding bullion's appeal while bolstering the dollar in which gold is priced.
Gold prices have fallen more than 20% since scaling above the key $2,000 per-ounce mark in March.
"It's very difficult to construct a bullish case for gold, not until we see a pivot with the Fed especially with (other) central banks tracing up with the Fed as well," said City Index analyst Matt Simpson.
Spot silver fell 0.6% to $18.72 per ounce, having earlier fallen to its lowest in more than two weeks. Platinum rose 0.7% to $859.62 and palladium edged 0.2% higher to $2,072.02.
(Reporting by Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu, Sherry Jacob-Phillips, Philippa Fletcher)