U.S. debt ceiling talks, seen as a potential threat to recovery of the world's leading economy, have made some progress. The House of Representatives plans to pass a bill on a nearly four-month extension of the borrowing limit.
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Recent upbeat data from China and the United States and monetary easing in Japan had triggered rallies in equities and precious metals.
"We continue to see a lot of monetary easing from the Bank of Japan and other central banks, and we think ultimately this will pick up gold sentiment once again," Standard Bank analyst Walter de Wet said.
Even so, underlying investment demand for gold has been subdued.
The SPDR Gold Trust, the world's top gold ETF, has seen an outflow of nearly 15 tonnes so far this year.
"Gold seems unable to push higher, because there is some long liquidation in the futures market, and we also see some liquidation in ETF holdings," de Wet said.
Gold stalled below $1,700 an ounce in early January and has struggled to break through key resistance at the 55-day simple moving average of $1,695.50, which has capped prices for the last five sessions, frustrating buyers.
"This is a corrective move up from the low we saw at the beginning of January, so gold is still in this short-term downtrend that we've seen since October (when the market touched a low of $1,698.50)," Axel Rudolph, a technical analyst at Commerzbank, said.
"We think it will go back up at some stage, but it might well stall here, come off again and, once we retest $1,600 and it holds, go back up again," he added.
Demand in the physical gold market remained strong in the South-East Asian region, but buying by major consumer India was expected to pause in the next few days while the government provides details on tax changes this week, analysts said.
"A higher import tax rate once again presents a challenge for Indian physical demand this year, as it did last year," broker UBS said in a note.
The Indian government lifted the import duty on refined gold to 6 percent from 4 percent and more than doubled the import duty on gold dore bars and ores.
Although the move was expected and the price impact was muted, the news was still weighing on confidence towards gold, analysts said.
"The news that India is lifting its import taxes on gold temporarily is having a negative impact on sentiment," Standard Bank's de Wet said.
SILVER PAUSES
Spot silver was little changed at $32.18 an ounce, snapping a seven-day upward streak that matched a similar run in August 2011.A robust inflow into silver-backed exchange-traded funds has helped spot silver prices rally more than 6 percent so far this year, as the metal's exposure to a quickened pace of economic growth attracted investors.
Holdings of iShares Silver Trust, the world's largest silver ETF, stood at 10,689 tonnes on Jan. 22, up 604.9 tonnes, or nearly 6 percent, from the end of 2012.
In other precious metals, spot platinum was down 0.4 percent to $1,687 an ounce, while palladium lost 0.3 percent to $721.72 an ounce.
The platinum group metals eased after touching multi-month highs last week on the back of output cuts in South Africa and hopes for an improvement in demand.
"Platinum is going to struggle a bit as we have no support from the jewellery sector and the futures market is very long, making it harder for the marginal buyers to come in," de Wet said.
"Also despite all the supply issues, there is enough metal around for now," he added.
Article reproduced as originally appeared in CNBC.
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