"Gold appears to have suffered by more than other commodity from the relatively peaceful election in Iraq," Barclays Capital precious metals analyst Kamal Naqvi said in a daily report.
Spot gold was quoted at $419.50/419.30 an ounce, down from $422.25/3.00 on Monday and near a fresh three-week low at $419.20.
"I think we'll see some more selling but nothing to take the market too far out of its current zone - the $4 drop we saw yesterday felt heavier than that," one dealer said.
Dealers said currency would dominate direction for bullion, with the dollar slightly up ahead of a possible US interest rate rise after Federal Reserve meetings on Tuesday and Wednesday. The euro was last at $1.3008.
"Worringly for gold, the dollar has achieved only modest gains so far against the euro, but an appreciation through $1.30 could well drive gold to break down below $420 towards technical support towards $414," Naqvi added.
Paul Merrick, vice-president of commodities at RBC Capital Markets, said in the shorter term the dollar may see another bout of strength, which would make investors reluctant to return to the gold market for now, although in the longer term he was much more positive.
US monetary tightening tends to lure cash into dollar deposits - boosting the currency and tarnishing gold for non-US investors.
Dealers were also alert to President George W. Bush's State of the Union address on Wednesday, with particular attention paid to any reference on what Washington will do to tackle its fiscal, trade and current account deficits.
A Group of Seven (G7) meeting is scheduled in London this week, and the major data focus is US non-farm payrolls on Friday.
Platinum was firm after Japanese buyers lifted the metal to a two-month high in Asian trade at $882.00 per ounce. Spot platinum later lost momentum and was last at $874.00/878.00, up from $869.00/873.00 on Monday.
Dealers said a break above $882 could take prices over $900.
Palladium was little changed at $188.00/192.00 from $187.00/190.00.
Silver was also mostly flat at $6.71/6.73, from Monday's $6.72/6.75.