An early January rally driven by a rout in global equities ran out of steam late last week after gold hit chart resistance at its 100-day moving average at $1,108 an ounce. Gains have also been capped by concerns over higher US interest rates.
Spot gold was at $1,094.20 an ounce at 1031 GMT, little changed from late on Monday, while US gold futures for February delivery were down $1.80 an ounce at $1,094.40.
The metal has retreated after hitting a two-month high on Friday in a rally driven by a slump in oil prices and world shares on fears over the health of the Chinese economy.
"The Chinese stock market crash and the unease it's created in the market that the government isn't able to control the economy the way it wants to has lifted gold prices higher," Natixis analyst Bernard Dahdah said.
"But generally, (we expect) gold to be below $1,000 this year," he said. "The market will be focused on what the Fed decides - if the Fed delays a rate hike, the price of gold will benefit, or if the inflation figures improve, we could see gold prices dropping."
Gold prices retreated from an overnight high of $1,099.15 on Tuesday as European stocks rebounded from an early three-month low and the dollar index rose 0.2 per cent.
The metal fell more than 10 per cent last year, largely on the back of expectations that the Federal Reserve is set to normalise US interest rates. Ultra-low rates, which cut the opportunity cost of holding gold while weighing on the dollar, were a key factor driving gold to record highs in 2011.
The Fed raised rates in December and attention has shifted to how many hikes will follow in 2016.
Atlanta Federal Reserve Bank President Dennis Lockhart said there may not be enough fresh data on inflation to support another US rate hike by March.
Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 2.1 tonnes on Monday, data from the fund showed.
Among other precious metals, palladium was the biggest faller, sliding 5 percent to a 5-1/2 year low of $449.55 an ounce in early trade. It was later at $464.70 an ounce, down 3.1 per cent.
Silver was flat $13.85 an ounce, while platinum was down 0.5 per cent at $839.02 an ounce.
© Thomson Reuters 2016