Bullion, often sought as a safe store of value in times of economic turmoil, is sensitive to rising yields as they raise the opportunity cost of holding non-yielding gold.
Spot gold was down 0.3% at $1,706.86 per ounce by 0326 GMT. Earlier in the session, bullion touched $1,704, its lowest since March 12.
U.S. gold futures were down 0.4% at $1,708 per ounce.
"Primary weighing factor on gold prices is the continuous rise in the U.S. long-term yields," said DailyFX strategist Margaret Yang, adding that although gold prices should rise being an inflation hedge, there is a constant decline in prices.
This decline in gold prices, "can be attributed to reflation hopes as this infrastructure plan will not only inject liquidity into the market, it'll actually pump money into the real economy ... therefore, the economic outlook is brighter than before."
Longer-dated Treasury yields gained amid expectations that U.S. President Joe Biden's infrastructure initiative could further bolster economic growth. [US/]
Further pressuring gold, dollar climbed to a one-year high against the yen on Tuesday as investors fretted about the potential fallout from the collapse of a hedge fund, identified as Archegos Capital.
"Gold's consolidation is breaking and if downward pressure takes prices below the $1,700 level, it could get ugly fast," Edward Moya, senior market analyst at OANDA wrote in a note.
"Massive support throughout the pandemic has been the $1,670 level and if that doesn't hold, not much support is seen until the $1,600 level."
Elsewhere, silver fell 0.3% to $24.59 an ounce and platinum shed 0.3% at $1,171.63.
Palladium was up 0.1% at $2,530.06, having slid 5.5% in the previous session.
(Reporting by Asha Sistla in Bengaluru, Editing by Sherry Jacob-Phillips)
By Asha Sistla
