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Gold fell on Thursday as the dollar regained some ground and uncertainty over Brexit eased, but the metal held close to a two-week high hit in the previous session as tepid U.S. inflation data cemented expectations that the Federal Reserve would hold rates.
Spot gold was down 0.4 percent at $1,303.87 per ounce as of 0555 GMT, after touching its highest since March 1 at $1,311.07 on Wednesday.
The United States (US) gold futures also dipped 0.4 percent, to $1,304.20 an ounce.
“The dollar is playing a main role in driving gold prices down during Asia trading hours. The dollar has been falling for the last four sessions and we are seeing a small rebound today,” said Margaret Yang, a market analyst with CMC Markets, Singapore.
Yang said the safe-haven demand for the metal, as a hedge against Brexit uncertainty, declined after British lawmakers rejected leaving the European Union (EU) without a deal.
The lawmakers are now widely expected to vote, later in the day, to delay Britain's departure from the EU, currently scheduled for March 29.
“The markets are assessing the landscape in Europe and UK after the vote. If we do see the deadline pushed out, there wouldn't be a huge impact (in gold prices), but the reaction will be great if we see some sort of deal agreed to in the UK parliament,” ANZ analyst Daniel Hynes said.
The dollar was 0.1 per cent higher against major currencies, after falling the most in two weeks in the previous session on soft US economic data.
US producer prices barely rose last month, resulting in the smallest annual increase in more than 1-1/2 years, reinforcing views that the Federal Reserve would be patient on future rate hikes.
Gold prices have gained about 2 per cent so far this year on expectations of a patient approach by the Fed to raise interest rates, and escalating worries over global economic slowdown.
Data released earlier in the day showed China's industrial output grew 5.3 per cent in the first two months of this year, the slowest pace of expansion in 17 years.
Market participants will now focus on the Bank of Japan's (BOJ) monetary policy meeting on Thursday and Friday.
“At the moment global central banks are leaning towards the dovish side and if BOJ is strongly dovish that could lead the yen to fall against the dollar and gold prices could go down,” CMC Markets' Yang said.
Among other precious metals, palladium was down 0.9 per cent at 1,542.62 per ounce, while platinum dipped 0.6 per cent to $832.79 per ounce.
Silver slipped for the first time in five sessions and was down 0.5 per cent at $15.37 per ounce.
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