Gold inched higher on Monday after two straight weekly losses but continued to trade near a six-week low and could face more pressure from weak physical demand in Asia and growing optimism about the US economy.
Gold has lost nearly $100 an ounce in the last 10 trading sessions, moving further away from a six month high hit mid-March.
The metal's safe-haven demand had been bolstered earlier in the year when fears over economic growth in the United States and emerging markets hurt global equities, and tensions between Russia and the West were high.
"Prices will go down further since those factors supporting gold in the first quarter are weakening now, such as geopolitical issues, and the emerging markets crisis," said Chen Min, a precious metals analyst at Jinrui Futures in Shenzhen.
Physical demand in Asia could pick up if prices fall to $1,180-$1,200, Chen said.
Spot gold was up slightly by 0.2 percent to $1,295.90 an ounce by 0312 GMT, but remained not far from a six-week low of $1,285.34 hit on Friday.
Recent U.S. data has been strong, indicating that the economy is recovering well after severe weather conditions.
Hedge funds and money managers cut their bullish bets in gold and slashed a net long in silver futures and options nearly in half in the week to March 25, according to data from the Commodity Futures Trading Commission on Friday.
Federal Reserve Chair Janet Yellen indicated earlier this month that interest rates could rise in the first half of 2015.
Low interest rates, which cut the opportunity cost of holding non-yielding bullion above other assets, had been an important factor driving bullion higher in recent years.
Investors are now eyeing US nonfarm payrolls data on Friday for further clues about the economy.
Physical demand in top bullion buyer Asia has been quiet due to the recent volatility in gold prices, which have edged lower for two straight weeks.
Only Japan has seen some pick-up in demand as consumers brought forward their purchases ahead of a sales tax hike from April 1.
Among other precious metals, platinum rose nearly 1 percent on Monday as labour strikes continued in top producer South Africa.
Job cuts are a certainty in South Africa's platinum belt because of losses stemming from a 10-week strike in the industry, the chief executive of world No. 1 producer American Platinum said, raising the risk of further unrest.