Gold prices on Wednesday retreated from a more than one-month peak hit in the last session, as a stronger US dollar and increased appetite for riskier assets depressed sentiment.

Spot gold fell 0.3% to $1,800.02 per ounce by 1022 GMT, while US gold futures dropped 0.6% to $1,800.

"The main market driver is the decline that was seen on the euro-dollar... the dollar is strengthening and this is not the best thing for gold," Carlo Alberto De Casa, a market analyst for Kinesis, said.

The dollar rose 0.2% to its highest since Dec. 22, increasing gold's cost for buyers holding other currencies, while European shares rose for a third straight session, hovering near an all-time high hit last month.

Despite the rise in Omicron cases, investors are waiting to see if the US Federal Reserve will hike interest rates three times in the coming year, De Casa said, adding that central bank policies will also be a market driver in 2022.

Higher rates increase bond yields, making non-yielding bullion less attractive.

Gold prices are on track for their biggest yearly decline since 2015, having fallen nearly 5% so far.

"Gold's annual decline this year was largely due to the surging US dollar, propelled by bets that inflation would force the Fed to lean hawkish," Han Tan, chief market analyst at Exinity, said.

Bond markets remain circumspect and have yet to be convinced that the Fed can deliver its hawkish pivot without derailing the US economic recovery, Tan said, adding that if Treasury yields rise as expected in 2022, that should erode the appeal of bullion.

Elsewhere, spot silver rose 0.2% to $23.03, platinum fell 1% to $966.50 and palladium shed 1.9% to $1,952.06.