As per reports, Spanish Prime Minister Mariano Rajoy faced calls to resign from the country's opposition leader, following allegations that he and senior officials in the ruling Popular Party received secret payments. In Italy, the emergence of Berlusconi in the political equation worried markets.
Moreover, dollar strengthening against other major currencies prompted investors to close off bets in the yellow metal.
International gold was seen trading at $1,674 an ounce.
Gold futures on the Multi Commodity Exchange was seen trading lower by Rs 81 at Rs 30,699 at 2.40 pm IST. Silver futures for March delivery dropped by Rs 84 at Rs 58,334 per kgs on the MCX.
Delhi spot gold of 99.9 and 99.5% purity was at Rs 31, 010 and Rs 30,810 per 10 grams, respectively.