Gold was steady in thin year-end trade on Tuesday on course for its biggest annual decline in 32 years as prospects for global economic recovery prompted investors to switch to riskier assets.
After a 12-year bull run gold has shed around 28% in 2013, with the US Federal Reserve's plan to step away from ultra-loose monetary policy undermining the investor case for holding bullion.
Years of accommodative monetary policies had propelled the price of gold to all-time highs of $1,920.30 an ounce in Sept. 2011, as low interest rates encouraged investors to put money into non-interest-bearing assets.
"As soon as short-term interest rates start rising then you can't afford to invest in something that doesn't pay yield like gold, but it's going to be equities ...and ...money markets funds will also seem more attractive," Standard Bank analyst Walter de Wet said.
"In that sort of environment (of higher rates) the key is the yield and also the credit risk, which is substantially lower right now, and not really working in favour of gold demand."
Spot gold was up 0.6% to $1,202.30 an ounce at 10:46 GMT, while US gold futures for February delivery fell 0.2% to $1,201.90 an ounce.
In wider markets, world stocks were ending 2013 close to six-year peaks and benchmark bond yields were poised for their first annual rise since 2009 as investors celebrated a pick-up in global growth with expectations of more to come. The dollar was also on track to end 2013 modestly higher against a basket of main currencies.
Gold was also set to post hefty annual losses in other currencies, with prices in euros down 31% on the year, the first fall since 2004. Prices fell 30% in Swiss francs and 29% in British pounds.
A drop in exchange-traded funds holdings showed investors lost faith in bullion as a hedge against inflation and an alternative investment after the US Federal Reserve announced plans to trim in its monthly bond purchases.
Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.37% to 798.22 tonnes on Monday, their lowest since January 2009.
In Singapore, premiums for gold bars were unchanged at $1.50 an ounce to the spot London prices, while in Hong Kong, offers stood at between $1.50 and a high of $2.00 as some suppliers were running out of stocks. In other precious metals, silver fell 0.2% to $19.51 an ounce.
Silver is down 36% this year in its worst annual performance since at least 1982, making it the worst performing precious metal in 2013. Spot platinum was down 0.1% at $1,354.25 an ounce and on course to post a 12% annual loss. Best performing palladium rose 0.2% to $707.50 an ounce - it is set to end the year up nearly one%.