Spot gold fell 1% to $1,851.50 per ounce by 10:10 a.m. EST (1510 GMT), retreating from a two-week high hit on Thursday. The metal was up 1.4% so far this week.
U.S. gold futures fell 0.8% to $1,851.50.
"Regardless of the asset class everything from equities to agricultural to softs are selling off and a lot of emphasis is on whether the stimulus could be passed and whether the (COVID-19) vaccine rollout could be effective," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
The strength in the dollar was also weighing on bullion with benchmark U.S. Treasury yields firm above 1%, Streible added.
U.S. President Joe Biden has proposed a $1.9 trillion coronavirus relief plan, though some Republicans expressed concerns over the amount.
Global equities benchmarks slipped off record highs and grains futures fell, while the dollar edged higher against key rivals.
Elsewhere, platinum fell 1.8% to $1,106.69 an ounce, having hit its highest since August 2016 on Thursday. It was set to post its second consecutive weekly gain, up 3.2%.
"As a result, the price differential to gold narrowed for a time to $720 per troy ounce. The last time it was any lower was in February last year," said Commerzbank analyst Carsten Fritsch in a note.
"There was no specific trigger for the price surge. The price may have been pushed up by technical buying after it exceeded its previous high at $1,130."
Silver fell 2.1% to $25.40 an ounce, but was up 2.7% so far this week. Palladium rose 0.2% to $2,366.23.
(Reporting by K. Sathya Narayanan in Bengaluru;Editing by Elaine Hardcastle)
By K. Sathya Narayanan