Gold steadied on Wednesday after the previous day's drop, supported by simmering conflict in Ukraine and the Middle East, but under pressure from buoyancy in stock markets after positive U.S. data and corporate earnings.
Sluggish physical demand in Asia in the seasonally quiet summer period is also weakening support for any price rally.
Other than seasonality, the possibility of a further drop in prices due to an improving U.S. economic outlook and stronger dollar is also keeping buyers away, dealers said.
Spot gold was at $1,307.10 an ounce by 0950 GMT, little changed from $1,307.00 late on Tuesday. U.S. gold futures for August delivery were up $2.10 an ounce at $1,308.40.
"Bullion slipped lower alongside the VIX volatility index as risk sentiment improved and equities gained," Andrey Kryuchenkov, an analyst at VTB Capital, said. "This suggests that last week's safe-haven buying had run out of steam, being the key driver lately.
"With little physical appetite at this point, we could take a little more downside to $1,290/93 and consolidate some more," he said. "Little has changed on the fundamental front as far as Asian consumer demand is concerned, with much-muted activity in both India and China this week."
Spot gold has traded within its narrowest monthly range in nearly five years so far in July. Prices have struggled to make significant headway in the face of rising equity markets, which have diverted some investment interest from gold.
European stocks rose on Wednesday on the back of strong earnings despite investors' concerns over the possibility of fresh European Union sanctions against Russia over the Ukraine crisis.
German bond yields dipped back towards record lows however, with conflicts in Ukraine and the Middle East supporting demand for safe-haven government bonds.
From a technical perspective, gold prices will need another trigger to extend gains after climbing 8.5 percent this year, according to analysts who study past price patterns to determine the future direction of trade.
"Although momentum tools are pointing higher within what is an ongoing bullish trend..., the yellow metal is required to break above resistance at $1,325.17, the 62 percent retracement of this month's setback," UBS said in a note on Wednesday.
"This should be the trigger for a move higher to next resistance at $1,345.46, the July 10 high, and then over the longer term to $1,392.22, the March extreme. Any downside from here should find support at $1,292.35, last week's low."
Among other precious metals, silver was up 0.3