Spot gold was down 0.2% at $1,790.90 per ounce by 1244 GMT, having hit its lowest since Dec. 1 at $1,782.40 earlier in the day after dropping 1.3% in the previous session.
U.S. gold futures fell 0.5% to $1,789.70.
"Gold markets seem to be fixated on U.S. yields," Natixis analyst Bernard Dahdah said.
"While there is an amazing amount of liquidity, we are going out of lockdowns and we are expecting growth to go back to normal levels," he added, noting that given such optimism investors had little interest in the safe-haven metal.
Growing expectations for inflation spurred benchmark U.S. Treasury yields to their highest since late February 2020. The surge in yields in turn prompted the dollar to rebound from a three-week low, further pressuring gold.
Breakeven inflation, a measure of expected inflation, is at its highest since August 2014 at 2.2%.
While gold is seen as an inflation hedge, higher inflation expectations have pushed yields up, increasing the opportunity cost of holding non-yielding gold.
Progress on a $1.9 trillion U.S coronavirus relief plan, as President Joe Biden built support for the bill that includes $1,400 stimulus checks, further drove yields up.
But gold could come back into favour once other currencies start to outperform the U.S. dollar later this year, said OANDA analyst Craig Erlam, adding that the metal could scale the levels seen in November, December and January, when it pushed above $1,900.
Investors are also looking forward to the minutes of the Federal Reserve's end-January monetary policy meeting due on Wednesday.
Platinum, used in catalytic converters for vehicles, fell 2.5% to $1,230.36, well below Tuesday's high of $1,336.50, a peak since September 2014.
Palladium declined 0.8% to $2,364.03, while silver eased 0.3% to $27.14.
(Reporting by Nakul Iyer in Bengaluru; Editing by Mark Potter and Jan Harvey)
By Nakul Iyer
