Gold declined to $1,083.50 (-0.97%) after Markit economics said in its preliminary report that China's Manufacturing PMI contracted once again to 48.2 in July from 49.4 reported previously. This decline spurred demand concerns, which added to expectations of a rate hike by the Federal Reserve and muted inflation worries.

Citibank analyst David Wilson believes that bullion is likely remain under pressure up to the Federal Reserve's September policy meeting. "The markets are all focusing on a September rate hike, so assuming that is when it occurs, you have to think that gold is going to remain under downward pressure up until that point," he said.