The precious metal came under pressure in earlier trade as traders took profits after a strong session on Monday, when gold had risen to an intraday high of $894.70 an ounce on the weaker dollar.
A dip in crude prices after Monday's record highs dampened sentiment toward the precious metal, which is often bought as a hedge against oil-led inflation.
"If oil prices are poised for a potential fall, players are going to hold back from buying gold in anticipation of that," said Fairfax IS analyst John Meyer.
Crude slipped after Monday's all-time high of $139.89, as investors took profits ahead of a meeting of oil producers and consumers in Saudi Arabia this weekend. U.S. crude futures ended down 60 cents at $134.01 a barrel.
However, the market was still supported by weakness in the dollar. The U.S. currency slipped against the euro on Monday as U.S. housing starts fell and after in-line producer price inflation numbers.
The data was interpreted as reducing the chances of an early U.S. rate hike from the Federal Reserve.
A softer dollar typically benefits gold, which is often bought as an alternative investment to the U.S. currency.
James Steel, metals analyst at HSBC in New York, told clients in a note that a flattening U.S. Treasuries yield curve signals a stronger U.S. dollar in the longer term, and that could weigh on gold prices.
