LONDON - Gold fell on Monday as the previous session's upbeat U.S. payrolls data sparked a fresh rally in stock markets and shored up expectations that the Federal Reserve would press ahead with further interest rate hikes this year.
World stocks hit a two-week high on Monday after Friday's strong jobs data helped offset investors' concerns about the potential for a trade war between the United States and other major economies.
Spot gold was down 0.5 percent at $1,316.91 an ounce at 1035 GMT, while U.S. gold futures for April delivery were 0.5 percent lower at $1,317.40 an ounce.
"We are now getting within distance of the FOMC (Federal Open Market Committee) meeting next week, with the rate hike being expected to be executed," Saxo Bank's head of commodity strategy Ole Hansen said.
"We've seen in the past that gold has been struggling ahead of these announcements, so I think we're just being sucked into the slipstream of that meeting. That's raising the risk that gold could be a bit more on the defensive."
Money market traders stuck to bets that the Fed would raise interest rates three times this year after data released on Friday showed U.S. job growth recorded its biggest increase in more than 1-1/2 years in February.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
U.S. Treasury yields advanced after the jobs data, while stock markets rallied as the numbers sparked a surge in risk appetite. That weighed on the dollar on Monday, though the impact of the softer U.S currency on gold was muted.
Gold slipped to its lowest in a week on Friday after the payrolls report, having come under pressure earlier in the week after failing to break through the $1,340 an ounce level for a second time in two weeks.
"Gold is likely to continue to run into offers around $1,330, (the) 50-day moving average, over the near term as participants adjust following Friday's strong U.S. jobs data," MKS said in a note.
"An easing of tensions on the Korean peninsula should strip the metal of some lingering risk premium."
Gold had benefited last year from concerns over North Korea's standoff with the United States.
Speculators raised their net long position in gold by 4,178 contracts to 161,812 contracts in the week to March 6, Commodity Futures Trading Commission (CFTC) data showed.
Among other precious metals, silver was down 0.7 percent at $16.47 an ounce. Palladium was 1 percent lower at $986.22 an ounce, while platinum was down 0.8 percent at $957.40 an ounce.