Weakness in the dollar - usually a tip to buy gold in non-US currencies - was likely to limit the downside, though gold was increasingly moving away from the influence of currency markets in favour of supply and demand fundamentals, bullion dealers said.
Profit taking ahead of the final European and US trading sessions of the year were more likely to be responsible for the metal's drop, which comes on the heels of an uptrend in gold demand. Gold price have risen about 18 percent this year.
"Gold's fundamentals are still intact. This is just some profit taking," a trader said.
The dollar tumbled 1 yen from the day's high against the Japanese currency. The dollar fell as low as 117.01 yen, down more than one yen from the day's high of 118.17 yen.
Spot gold was quoted at $513.25/$514.00 an ounce, versus $515.70/516.40 an ounce in late New York trading. The last afternoon fix in London was at $513.
A 10.5 percent drop in COMEX gold warehouse stocks that took inventories to 6,497,818 ounces is seen as cushioning gold's fall, dealers said. New York metals exchange trading will close early on Friday and take a holiday on Monday.
Spot silver fell 7 cents to $8.75/79 an ounce.
Spot platinum dropped $1 to $962/967 an ounce.
Spot also lost $1 and was trading at $253/257 an ounce.