The precious metal was down more than 3.5 percent so far this week on European debt fears due to a change in the French presidency, the frail state of Spanish banks and political
gridlock in Greece.
This week's turmoil in Europe prompted investors to unwind long positions in gold built on optimism that followed a 130-billion euro bailout deal between the EU, the IMF and Greece.
"With the fate of the euro once again hanging in the balance, investors may have also soured on gold, perhaps questioning whether they are now going to be seeing sufficient
amounts of 'bail-out euros' that could potentially help the precious metal find a bid," said Edward Meir, metals analyst at INTL FCStone.
Spot gold bounced off session lows and was down 0.7 percent on the day at $1,593.81 an ounce 11:42 a.m. (1542 GMT) Bullion hit a four-month low of $1,579.30, its lowest since Jan. 3.
US gold futures for June delivery fell $10.40 to $1,594.10 an ounce, with trading volume surpassing its 30-day average for a second straight day.
The gold price has been in decline for most of the past two months, since US Federal Reserve Chairman Ben Bernanke gave no signal that the central bank would start a third round of government bond buying, or quantitative easing.
Gold's 2012 gains totaled 14 percent in late February, but now it is up less than 2 percent on the year to date.
Gold this year had tended to trade in tandem with riskier assets such as equities and crude oil. But this week's losses have the precious metal underperforming 2012 gains of about 9 percent in the S&P 500 stock index and nearly 6.5 percent in crude oil.
Nic Brown, Natixis' head of commodity research, said a lack of inverse correlation between gold and perceived risky assets such as the euro suggested the metal was not attracting demand from jittery European investors.
Other precious metals were down but off their session lows. Silver fell 0.5 percent to $29.28 an ounce.
Palladium slightly outperformed gold and silver following the release of Chinese data that showed robust year-on-year growth in car sales in the world's largest auto market.
Palladium was last down 0.1 percent on the day at $614.47 an ounce, while platinum edged down 0.5 percent at $1,496.24 an ounce.
