The metal, however, remained on track to end a six-month long run of losses, the longest such streak since a period from August 1996 to January 1997. It has risen more than 2 percent so far in October, the biggest monthly gain since January.
Spot gold was 0.5 percent lower at $1,217.08 an ounce at 1025 GMT, having touched its lowest since Oct. 11 at $1,214.07 earlier. U.S. gold futures fell 0.6 percent to $1,218.5 an ounce.
“The dollar index looks like it’s going higher and there is uncertainty related to the mid-term elections next week,” said Alasdair Macleod, head of research at GoldMoney.com. “If there are signs that the Republicans are going to do well, this will probably lead to yet more dollar strength.”
The midterm elections on Nov. 6 will determine whether the Republican or Democratic party controls the U.S. Congress.
The dollar index climbed to a 16-month high while the yuan against the dollar fell to its weakest level since May 2008.
“The dollar versus the emerging market currencies, especially the Chinese yuan, is something the market is looking at. The depreciating yuan is the key reason why gold has been weak,” said Julius Baer analyst Carsten Menke.
“Gold benefited quite a lot from the equity market jitters we had in the past week or so. Now the equity markets are calming a bit and trying to build a bottom at these lows, which is also negative for gold,” Menke added.
European shares rallied, carrying forth the positive momentum in global stock markets, bringing some relief after a brutal October in which equities suffered one of their worst drops in a decade and spooked investor confidence.
Gold has fallen around 11 percent since April, hit by rising U.S. interest rates and a global trade war that threatened economic growth, prompting investors to rush to the safety of the dollar instead.
“As long as inflation doesn’t become a real threat or equities plunge much further from current levels, many investors will prefer yielding instruments than investing in gold, and that’s what the dollar is providing,” said Hussein Sayed, Chief Market Strategist at FXTM.
“Gold is likely to trade within a narrow range of $1,200 – $1,250, until new factors emerge ... It needs a bigger trigger to see another rally similar to the one seen since the beginning of the month,” Sayed added.
Meanwhile, silver fell 1 percent to $14.29 per ounce after reaching $14.25, its lowest since Oct. 11 earlier.
Platinum rose 0.3 percent to $835.10 per ounce and palladium eased 0.4 percent to $1,069.24.