Gold eased to a two-week low on Wednesday after its biggest one-day drop in four weeks, as growing expectations that Britain will vote to remain in the European Union calmed risk aversion and lent a steadier tone to stocks.
The metal fell nearly 2 per cent on Tuesday after two opinion polls suggested it was increasingly likely that voters would opt on Thursday to stay in the EU.
Fears of a Leave vote had sent gold to a near two-year high last week.
Spot gold was down 0.2 per cent at $1,265.95 an ounce at 0930 GMT, off an earlier two-week low of $1,261.01, while US gold futures for August delivery were down $4.00 an ounce at $1,268.50.
"Brexit is still the biggest threat. Markets are already celebrating premature victory (for the Remain side) and that is a major concern for us,” Naeem Aslam, chief market analyst at ThinkForex, said.
"A Remain vote is highly priced into gold now. The Leave vote is the one we have to watch out for, because that is not priced in.”
Stocks rose while traditional safe-haven assets like bonds fell on Wednesday on cautious anticipation of a Remain vote.
A vote to leave the 28-member bloc could tip Europe back into recession, putting more pressure on the global economy and increasing the appeal of bullion as a counter-cyclical asset, analysts said.
"I think there is a lot more room on the upside (for gold) should there be a Leave vote, rather than the downside on a Remain vote,” Marex Spectron said in a note.
“If the former, gold has the potential to rally as far as $1,350 in the medium term. If the latter, then I really don't see prices dropping much more than $20-$25 as a quick knee-jerk reaction.”
Investors are also keeping an eye on the path of US interest rates. Federal Reserve chair Janet Yellen had said on Tuesday that the Fed's ability to raise interest rates this year may hinge on a rebound in hiring.
Holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.39 per cent to 912.33 tonnes on Tuesday, the highest since September 2013.
Among other precious metals, silver was down 0.5 per cent at $17.21 an ounce, while platinum was 0.4 per cent higher at $980.80 an ounce and palladium was up 0.5 per cent at $553 an ounce.