Gold slipped on Thursday as the U.S. dollar strengthened against other currencies, while there were concerns that a failure to sustain recent highs could prompt some investors to shift their money to stocks or bonds.
Other precious metals also tracked gold lower, with platinum hovering below a two-month high hit on Wednesday after supply concerns driven by a possible power shortage in main producer South Africa subsided and speculators in Japan booked profits.
Spot gold was at $1,122.45 an ounce by 0240 GMT, down $1.60 from New York's notional close on Wednesday, when it hit a 1-week high at $1,132.80 on early gains in the euro before falling sharply after the release of U.S. producer prices data.
Gold was still trading above the 50 and 100-day moving averages but it has lost about 2 percent in value since rallying to a 6-½ week high near $1,150 in early March.
"The equities markets have been a bit firmer. That's probably taken a little bit of interest away from gold. The PPI data in the U.S. last night suggested that underlining inflation is still relatively contained," said David Moore, commodities strategist at CBA in Sydney.
"The broad picture is, for the moment there's a little bit of a lack of impetus to buying gold," he added.
U.S. gold futures for April delivery fell $2.2 an ounce to $1,122. The contract shed early gains on Wednesday after data showed U.S. producer prices fell more deeply than expected in February as energy costs tumbled.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,115.511 tonnes as of March 17, unchanged from the previous business day.
The dollar firmed on Thursday, recovering some of its losses against higher-yielding currencies made the previous day, as investors trimmed short dollar positions ahead of U.S. consumer inflation readings for February.
The euro dipped 0.1 percent from late New York trade to $1.3720, having come off a five-week high of $1.3819 on trading platform EBS the previous day.
U.S. stocks gained on Wednesday, pushing the Dow to a 17-month high, after a benign February inflation reading supported the Federal Reserve's renewed pledge of low interest rates.
Bullion dealers noted selling pressure from a weaker euro against the dollar but there was also support from firmer copper prices and oil prices above $80 a barrel.
"Speculators are selling gold on the back of a weakening euro but it seems there's no follow through," said a dealer in Hong Kong. "I don't really see a particular interest in gold but if you look at the PGMs, they are still pretty steady," he added.
Platinum and palladium, mainly used in autocatalysts, have risen strongly this year on expectations for rising car sales.
South African state-run utility Eskom said on Tuesday power supply is seen as a serious concern from 2011 onwards until new power stations come onstream.
