"Firstly, rising US-North Korea tensions, associated with the country's nuclear ambitions, culminated over the weekend with a (failed) missile test, and increasingly firm messaging from the US, with senior officials remarking that the US" "policy of strategic patience has ended' with North Korea", BMO said in a note.
Gold was prevented from falling further as the U.S. Dow Jones Industrial Average fell by 109.63 points, or 0.53 percent, as of 1900 GMT.
Data showing China's economy grew faster than expected in the first quarter helped offset the soft USA figures. Data on Friday showed US retail sales fell for a second straight month in March and consumer prices dropped for the first time in just over a year.
Silver for May delivery fell 11 cents, or 0.60 percent, to close at 18.162 dollars per ounce.
Wing Fung Financial Group's head of research Mark To said he expected gold prices to hover near $1,280, trading in a range between $1,270/oz-$1,310/oz.
He pointed out that compared with the past, many fear that North Korea may be on a collision course with the United States, under the leadership of Donald Trump, who has been making clear warnings that action will be taken if Pyongyang continues to continue its weapons of mass destruction program.
Fed fund futures 0#FF: rose in price, now pricing less than a 50 percent chance of a rate hike in its June 13-14 meeting for the first time in about a month.
The yellow metal was steady on Tuesday after hitting a five-month peak the previous session, bolstered by a softer dollar, North Korea tensions and nervousness ahead of the French presidential election.
The dollar slipped to 108.35 yen, hitting a five-month low. Saxo Bank's head of commodity strategy, Ole Hansen, told Reuters "expectations about the dollar are up for revision, the strong dollar story is fading, Trump is talking it down and we're seeing weakness creep into USA data, changing the perception of how much rates have to rise".
US Vice President Mike Pence said on Wednesday that Washington would work with its allies and China to put economic and diplomatic pressure on North Korea but added that America would defeat any attack with an "overwhelming response".
The Turkish lira jumped about 2.5 percent to 3.6300 per dollar versus 3.7220 on Friday after President Tayyip Erdogan snatched a victory in a referendum to grant him sweeping powers in the biggest overhaul of modern Turkish politics.