Though gold has appeared unable to break the heavy resistance at $1,750 an ounce in a few attempts over the past week, the generally bullish sentiment remained despite a flash crash that sank prices to as low as $1,705.64 an ounce.

US lawmakers are engaged in talks to avert $600 billion worth of tax hikes and spending cuts that would roll in early next year, threatening to push the economy back to recession. In the latest development, House Speaker John Boehner voiced optimism that Republicans could broker a pact with the White House to avoid the "fiscal cliff" on Wednesday.

The threat of the US economy slipping off the fiscal cliff may keep gold prices supported, but the strength in the dollar - a more popular safe haven - is likely to weigh on gold's sentiment.

"Generally people are still pretty bullish on gold and last night was just a one-off correction, nothing extraordinary," said a Singapore-based trader, adding that $1,650-$1,700 would be a good buying level.

But he said physical demand was disappointing in Asia.

"We aren't seeing much physical demand, which is quite bad for this time of the year," he said.

Spot gold edged up 0.1 percent to $1,721.41 an ounce by 0244 GMT, after tumbling 1.3 percent in the previous session due to a heavy bout of stop-loss selling.

US gold gained 0.3 percent to $1,721.30.