Gold for December delivery dropped $16.30 Thursday to finish at $1,713.80 per ounce.
President Barack Obama and congressional leaders are scheduled to meet Friday to discuss the budget. Obama and Republican congressional leaders are at odds over the best way to resolve budget disagreements before tax hikes and spending cuts take effect Jan. 1. Many economists believe that without a compromise, the U.S. could wind up back in a recession.
Meanwhile, European Union statistics showed that the 17 countries that use the euro are in recession for the first time in three years as the region struggles with a three-year-old debt crisis. A recession is defined as two consecutive quarters of economic contraction.
Gold has a reputation as a relatively safe asset to hold during economic turmoil but investors are "in a quandary and conserving cash," George Gero, vice president at RBC Global Futures, wrote in an email.
In other metals trading, December silver fell 20.6 cents to end at $32.674 per ounce, December copper rose 0.9 cent to $3.4625 per pound, January platinum dropped $18.30 to $1,573.30 per ounce and December palladium fell $10.35 to $631.20 per ounce.
The economic uncertainty also pressured energy products. Benchmark oil dropped 87 cents to end at $85.45 per barrel, heating oil fell 1.47 cents to $2.9735 per gallon, gasoline futures rose 1.72 cents to $2.6962 per gallon and natural gas fell 5.7 cents to $3.703 per 1,000 cubic feet.
In agricultural contracts, orange juice futures rose 3.1 percent as traders bought contracts to get in position for the winter months, said Jack Scoville, vice president Price Futures Group. Florida crops are in good shape and the freeze season won't begin for several weeks. Frozen orange juice concentrate for January delivery rose 3.45 cents to end at $1.1625 per pound.
December wheat fell 3.25 cents to end at $8.455 per bushel, December corn fell 4.5 cents to $7.2125 per bushel and January soybeans fell 17 cents to end at $14.02 per bushel.