On Tuesday, gold prices fell as traders assessed the Federal Reserve's monetary policies after data showed a decline in U.S. manufacturing activity. Also, OPEC+'s production cuts sparked inflationary risk.
As of 0314 GMT, spot gold was 0.2% lower at $1,980.39 an ounce. U.S. futures fell 0.1% to $1.997.70.
Bullion was more expensive for overseas buyers because the dollar index was slightly higher.
In the short term, gold could experience "consolidative prices action in the absence of a new catalyst and as markets monitor oil price gains as that may throw an indicator on inflation outlook and complicate monetary policies decision," Christopher Wong, OCBC FX strategist.
Oil prices have stabilized, with investors shifting their attention to demand trends as well as the effects of higher oil prices on the global economic system.
After a weekend surprise cut in OPEC+ crude oil production, gold prices fell Monday. However, prices rallied by 1% after the US released weak economic data.
U.S. manufacturing activity fell to its lowest level in three years in March, as new orders plummeted. According to analysts, tighter credit conditions could cause further declines in activity.
Bullion can be used as an inflation hedge, but higher rates will increase the opportunity cost to hold the non-yielding asset.
The market sees a 60% chance that the U.S. Fed will raise rates by one quarter point in May. However, the probability of a rate reduction later in the year rose.
"Over the short term (Q2)," Edward Meir wrote in a note. He is a Marex metals analyst.