Gold stalled in Asian afternoon trade on Wednesday, shunned by jewellery manufacturers who are unhappy about current high prices, traders said.
Spot gold was quoted at $404.80/405.30 an ounce, versus $404.95/405.70 last quoted in New York on Tuesday when gold hit a near two-week high at $406.75 an ounce.
Gold has rebounded by around nine percent since falling to this year's low of $371 an ounce in May but dealers said buying interest from top consumer India had slowed since the market recaptured $400.
"I expect Indian traders to be buyers on price dips towards $390 but an even more significant fall appears required to stimulate gold demand through the Middle East and Asia," said Kaman Naive, an analyst at Barclays Capital.
Naqvi saw gold falling towards $370 an ounce, a level last seen in October 2003, in the next six months because of ample supply, a poor physical market and a better outlook for the US dollar.
Gold demand in India normally picks up during the festive season that starts from mid-August and ends in mid-November. Many Indians consider gold an auspicious metal and like to present it as a gift during religious festivals.
"It appears the buyers are not willing to buy gold above the psychological barrier of $400 an ounce," said N M Rothschild in a report. "However, as the wedding season approaches, buyers will be forced into the market with demand expected to peak in November with Dowel, the Hindu festival of lights," it said.
In Tokyo gold futures, the benchmark August gold futures contract rose one yen per gram to 1,429-yen gram. "There's a little bit of physical buying in Asia but I think that's an isolated case.
Some people believe it's better to buy now before the market breaks $410," said one dealer.
But the buying, which had pushed up the price to a high of $405.50 an ounce, quickly diminished as the euro weakened against the US dollar. In Hong Kong, a key trading city in East Asia, gold bars were at a discount of 10 US cents an ounce to London spot prices, little changed from last week, as consumers from China, Japan and South Korea waited for prices to fall below $400.
Dealers said gold was likely to trade in a tight range of $402 to $407 an ounce as the market waited for more US economic data which may offer clues about the pace of future interest rate increases.
Investors expect the Fed to raise rates by 0.25 percentage point at its September 21 policy meeting.
Traders are also waiting for the Federal Reserve Bank of New York's regional survey of factory activity, due later on Wednesday, which is expected to show a jump to 18.8 in September from 12.6 in August.
In other precious metals, platinum was at $838/843 an ounce, versus $843/848 in New York, while sister metal palladium was quoted at $208/213 an ounce, compared with $207.50/213.50.
Silver was unchanged at $6.18/6.21 an ounce.
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