Gold futures settled lower Tuesday after hitting three-week lows during a session that saw the dollar rise on weak U.S. consumer confidence data.
A resurgent dollar prompted gold investors to take profits in gold, which has rallied in the past two months.
Gold could test lower at $1,000 (U.S.) an ounce without support from the stock market, said Adam Klopfenstein, senior market strategist at MF Global's Lind-Waldock division in Chicago.
"So goes the equities market, so goes the rest of the commodities spectrum," Mr. Klopfenstein said. "I think that relationship is going to stay in play for the foreseeable future, with an indirect relationship to the dollar."
U.S. December gold futures settled down $7.40 at $1,035.40 an ounce on the Comex division of the New York Mercantile Exchange.
Spot gold was at $1,038.70 an ounce at 2:55 p.m. ET, up slightly from $1,037.10 late in New York Monday.
Gold bounced off session lows after finding resistance just above $1,030 an ounce, the long-standing record high it passed on Oct. 6.
Afshin Nabavi, head of trading at MKS Finance in Geneva, said prices should stay in a $1,030 to $1,070 range. He said gold moved lower due to the euro's weakness against the dollar.
"I would say we are getting close to the bottom for gold," he said. "This is the correction we were looking for."
The dollar rose to a two-week high against the euro after data showed U.S. consumer confidence waned in October.
The dollar has weakened in recent months as encouraging economic data has whetted investors' appetite for other currencies and riskier investments such as commodities. But any weak U.S. data has boosted the dollar as risk appetite wanes.
Oil rose back above $79 a barrel after three straight days of declines, as investors awaited direction from equities and U.S. oil inventory data.
In the physical gold market, a dip in prices has sparked some bargain hunting in major gold consumer India, though the weak rupee weighed on prices. Jewellery buying has been weak this year as high prices deterred investors.
In New York, the world's biggest gold-backed exchange-traded fund, the SPDR Gold Trust, said it saw an outflow of 1.22 tonnes on Monday. Investment demand for products like ETFs has been a major support to prices this year.
Among other precious metals, spot silver was at $16.61 an ounce, down from $17.05 late on Monday. During the session, silver tracked gold down to a three-week low of $16.47.
Platinum also touched a three-week low of $1,305.50 an ounce, and was later at $1,315.50 an ounce against $1,330.50. Palladium was at $325.50 against $329.50.