Spot gold eased 0.1% to $1,886.17 per ounce by 0623 GMT, while U.S. gold futures were down 0.2% at $1,884.50.
While a Democrat-driven agenda in the U.S. Senate may result in larger fiscal stimulus and thereby boost gold, a vaccine-fuelled U.S. economic recovery may re-energize the dollar and push gold to sub-$1,850 levels, Tan added.
Propping up bullion, the dollar index was down 0.1%.
Gold dropped as much as 1.3% on Monday after Moderna said its vaccine was 94.5% effective in preventing COVID-19 based on interim data from a late-stage trial, becoming the second U.S. drugmaker after Pfizer to report results exceeding expectations.
Meanwhile, Asian shares pushed into record territory on vaccine optimism.
However, the monetary environment is still very accommodative and may stay at current levels into spring 2021, providing near-term support for gold, said Margaret Yang, strategist at DailyFX.
Gold, considered a hedge against inflation and currency debasement, has gained over 24% this year, mainly benefiting from global stimulus to cushion the effect of the pandemic.
Federal Reserve Vice Chair Richard Clarida on Monday acknowledged the new vaccine as a positive for economic recovery and said that the central bank would apply an expansive view of the labor market before deciding on any rate hikes.
Silver fell 0.7% to $24.58 per ounce. Platinum eased 0.4% to $921.49, while palladium slipped 1.1% to $2,308.11.
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