Gold eased for a second session on Wednesday as equities inched higher on optimism over U.S. economic growth, curbing bullion's safe-haven appeal.
Prices were hurt by data showing the U.S. trade deficit fell to a four-year low in November as exports hit a record high and weak oil prices held down the import bill.
The numbers, the latest in a string of strengthening economic fundamentals, left economists anticipating a far stronger pace of growth for the fourth-quarter than previously expected.
"The global economy will continue to stabilize in the next few months so we won't have much acceleration of prices," said Alexis Garatti, an economist at Haitong International Research in Hong Kong.
A strong economy and higher equities curb demand for gold which is seen as an alternative investment.
Gold prices will decline in the first half of the year, but may steady in the latter half as fundamentals improve, Garatti said.
Spot gold had eased 0.3 percent to $1,228.19 an ounce by 0301 GMT, after snapping a five-day rally on Tuesday.
Asian shares climbed on the U.S. trade data, while the dollar was hovering near a one-month high.
Markets are awaiting the release of the minutes of the Federal Reserve's December meeting - when the bank decided to cut its $85 billion in monthly bond purchases - to gauge the pace at which the central bank will scale back stimulus.
Two top Fed officials said they expected the bank to reduce stimulus at a steady pace, with the lone official to dissent against the bank's decision to trim its bond buying saying he was comfortable with the approach.
On the physical side, the pace of Chinese buying seemed to have dipped slightly on Wednesday after a frantic buying spree earlier this week, based on volume and price data on the Shanghai Gold Exchange.
Premiums eased slightly to $19 on Wednesday from over $20 seen earlier this week. Trading volumes on Monday hit their highest in eight months but have since slowed.