The precious metal pared initial losses as U.S. equities staged a late-session rally based on optimism about the performance of major financial companies despite disappointing earnings by U.S. investment bank Goldman Sachs.

Gold, traditionally a safe-haven metal, slumped 1 percent in the last two sessions, moving in lock-step with riskier assets such as equities, which fell sharply on Monday.

"Gold does not seem to garner the same safe-haven demand that we did several weeks back, when we'd have seen concerning news out of Europe have stabilizing effects on gold," said David Meger, director of metals trading at futures broker Vision Financial Markets.

"Right now, we are back to the (inverse) dollar-gold correlation."

Spot gold was down 0.5 percent at $1,663.19 an ounce by 3:51 p.m. EDT (1951 GMT).

The price of gold hit a record $1,920.30 in early September.

In early trade, bullion came under pressure after credit rating agency Moody's said it may put a negative outlook on France's triple-A credit rating. The warning came ahead of a crucial EU summit, which German leaders said would not yield a miracle cure for the region's debt crisis.

Also weighing on gold was news that China's growth slowed in the third quarter to its weakest in more than two years.

U.S. gold futures for December delivery settled down $23.80 at $1,652.80 an ounce. Volume for Tuesday's decline was markedly higher than the recent quiet trading pace, and set to be the heaviest turnover in two weeks.

GOLD CHART BEARISH

A double top, based on the two recent highs formed in late August and early September, prompted analysts to turn bearish on the metal's near-term outlook.

Gold could fall below $1,500 an ounce in the near term, as bullion has underperformed other assets and appears to be losing its safe-haven appeal, CitiFX said.

CitiFX said, however, it still expects the precious metal to rise above $2,000 an ounce after a correction and eventually trade as high as $3,400.

"Gold has gone from being a protection against 'risk off' to a 'risk-off trade' in itself ... We still believe that this market nervousness has further to run in the coming weeks or months," CitiFX strategists said in a note.

Independent investor Dennis Gartman, who has been buying gold in non-U.S. currencies since mid-2009, said he plans to halve his gold positions, citing bearish technical signals and prospects of margin-call selling. Gartner also cut his gold exposure in August.

Silver rose 1.2 percent to $32.24, while platinum dropped 1.1 percent to $1,533.99 an ounce and palladium turned higher, up 1 percent at $621.47 an ounce.