Spot gold fell 0.2% to $4,270.83 an ounce by 0425 GMT, leaving the metal more than 2% lower for the week. US gold futures, however, edged up 0.2% to $4,305.10.
The decline came as financial markets increasingly focused on the prospect of tighter US monetary policy. A stronger dollar makes gold, which is priced in the US currency, more expensive for buyers holding other currencies. Rising US Treasury yields have also added pressure by making interest-bearing assets relatively more attractive.
"Focus will definitely continue to be on the interest rate situation. When we start to see markets pricing in a much more hawkish Fed, it strengthens the dollar and is negative for gold," said Kelvin Wong, senior market analyst at OANDA.
Fed outlook keeps pressure on bullion
Expectations for higher US interest rates for longer strengthened after two Federal Reserve policymakers indicated that additional rate increases could be necessary to bring inflation under control.
The comments followed last week's quarter-point increase in the benchmark interest rate, reinforcing concerns among investors that the US central bank could maintain a restrictive monetary policy for longer than previously expected.
"Returning inflation to 2% is a top priority, and I will support the policy path that gets us there while carefully weighing risks to the labour market along the way," Philadelphia Fed President Anna Paulson said.
New York Fed President John Williams also indicated that tighter monetary policy could be forthcoming, adding to market expectations of further rate increases.
According to CME's FedWatch Tool, markets were pricing in a nearly 69% probability of a US rate hike in October.
Gold faces competing forces
Gold is traditionally regarded as a hedge against inflation and tends to benefit from economic and geopolitical uncertainty. However, the metal does not pay interest, meaning that higher interest rates can reduce its relative attractiveness compared with assets that offer yields.
That dynamic has left gold caught between persistent demand for safe-haven assets and pressure from monetary policy.
"I remain very positive on gold for the rest of the year. Ongoing geopolitical friction and mounting sovereign debt are driving constant demand for safe-haven assets," said Joshua Rotbart, founder of J. Rotbart & Co.
The outlook for bullion therefore remains closely tied to developments in US inflation, interest rates, the dollar and investor demand for protection against economic and geopolitical risks.
Other precious metals also weaken
Gold was not alone in facing pressure in the precious-metals market.
Spot silver fell 0.5% to $63.59 an ounce, while platinum declined 0.1% to $1,746.36. Palladium dropped 1.9% to $1,249.71.
All three metals were also on course to record weekly losses, reflecting the broader pressure across the precious-metals complex as the dollar strengthened and expectations for US interest rates remained elevated.