"The dollar has strengthened overnight from an over two-year low, that is weighing on prices," said DailyFX strategist Margaret Yang. "Monday's rally largely priced in a Democratic win in the Senate election, so we're seeing some profit-taking as well."
Bullion jumped as much as 2.5% on Monday after the dollar slipped to its lowest since April 2018, but since then the U.S. currency has recovered.
The dual runoff elections in Georgia will decide which party controls the U.S. Senate. A win by Democrats is seen to boost stimulus.
England went into a new national lockdown to contain a surge in COVID-19 cases, while New York registered its first case of the more contagious strain of coronavirus.
"In view of still accelerating coronavirus crisis in the U.S., the Fed will ... perhaps hint at further monetary support and extension of the extra low interest rate environment beyond 2023," Yang said.
Minutes of the U.S. Federal Reserve's last policy meeting are due on Wednesday.
Gold's trend remains bullish as inflation expectations are increasing. Fed's dovish tone and a weaker dollar will push gold towards $2,000-$2,050 this year, said Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai.
Gold is considered a hedge against inflation and currency debasement.
The 10-year Treasury Inflation Protected Securities (TIPS)breakeven inflation rate topped 2% for the first time since November 2018 on Monday.
Silver ticked up 0.1% to $27.24, platinum lost 0.9% to $1,060.47, and palladium rose 0.3% at $2,380.10.
(Reporting by Sumita Layek in Bengaluru; Editing by Subhranshu Sahu)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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