Gold slips on profit-taking after rally to over three-month peak

"Gold's move today is primarily due to profit taking, with the dollar recouping some of last week's losses that followed the buyback announcement," Saxo Bank analyst Ole Hansen said.

"The reasons why investors are falling back in love with gold again have not gone away and will likely continue to support in the coming months," Hansen added.

Gold's recent rally came after the U.S. Treasury Department announced it would double the size of liquidity support buyback operations for longer-dated notes and bonds, sending the dollar to a more than three-month low last week.

The U.S. dollar regained some strength on Tuesday amid a revived debasement trade, making greenback-priced bullion more expensive for buyers overseas.

Markets now await data from the Personal Consumption Expenditures report (PCE) on Wednesday, along with Fed Chairman Warsh's debut speech at the annual Jackson Hole symposium on Friday to further gauge the policymaker's monetary stance.

Traders are currently pricing in a 42% chance of an interest rate hike in September, and a 58% chance that the Fed will leave rates unchanged, according to the CME FedWatch Tool. A high interest rate environment tends to diminish bullion's appeal to investors as it does not yield any interest.

Meanwhile, gold-backed ETFs attracted inflows of 46.7 metric tons ($6.4 billion) last week, which was their largest weekly demand in 10 months, according to the World Gold Council.

On the geopolitical front, Iran vowed to retaliate against expanded U.S. economic sanctions that the Americans said would cut off Iran's economic lifeline.

Among other metals, spot silver XAG= fell 1.6% to $67.84 per ounce, platinum XPT= dropped 1.4% to $1,849.27, and palladium XPD= slid 1.8% to $1,332.75.