Gold fell around 1% on Tuesday as data indicating economic growth on both sides of the Atlantic dented its appeal as a safe haven, while a steady dollar also weighed prices down.
The figures showed that growth in the U.S. services sector rebounded from a three-year low, while British businesses boomed and activity at euro zone companies expanded, albeit modestly, in July for the first time in 18 months.
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Spot gold fell as much as 1.2 percent to $1,287.44 an ounce early in the day and was down 1.1 percent at $1,289.16 by 1152 GMT.
U.S. gold futures for December fell $13.90 to $1,288.50 an ounce.
Losses were exacerbated by technical selling as automatic sale orders were placed by traders below the $1,300 an ounce mark to limit losses, traders said.
"We fell through the psychological support level of $1,300 last night, and it does feel as the prevailing dollar strength is curtailing gold momentum," bullion dealer Sharps Pixley CEO Ross Norman said.
"It is hard to read too much into moves during the summer months as the market can fluctuate widely on very small trades ... I suspect we can see some more downside from here in the short term."
The dollar was steady against a basket of currencies, and European shares nudged higher after data showed a faster-than-expected recovery in the UK and German economies.
Benchmark U.S. Treasury yields rose to around 2.65 percent, below July's two-year peak of 2.755 percent but still higher than at the start of the year. The returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest.
Gold has lost around 25 percent of its value this year on fears the U.S. Federal Reserve will curb its monetary stimulus on signs of economic recovery.
Dallas Fed President Richard Fisher reiterated on Monday that the stimulus tapering is likely to start sooner rather than later.
"Since (Fisher) has been one of the most vocal critics of the bond purchasing programme, this is to be taken with a pinch of salt," Marex Spectron said in a note. "However it certainly didn't help the cause of the precious metals."
PHYSICAL DEMAND SLOW
Gold importers in top bullion consumer India remained on the sidelines for a third straight week due to policy uncertainty on shipments, and premiums eased.
Gold prices on the Shanghai Gold Exchange fell 1.4 percent on Tuesday on lower demand, dealers said.
Premiums to London spot prices in Hong Kong - a major supplier to China - have fallen to around $3-$4 an ounce from $5 two weeks ago.
As a gauge of investor sentiment, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.2 percent to 917.14 tonnes on Monday.
Gold outflows from exchange-traded products (ETPs) reached $2.6 billion in July, bringing total redemptions for the year at $30.9 billion, according to the latest data from money manager BlackRock.
Silver was down 0.1 percent to $19.68 an ounce. Platinum fell 0.9 percent to $1,434.24 an ounce and palladium lost 0.7 percent to $726 an ounce