BENGALURU - Gold prices fell on Monday as investors sold the metal on expectations that a strong U.S. economy would bring U.S. higher interest rates and a stronger dollar.
Spot gold was down 0.5 percent at $1,185.61 an ounce at 1120 GMT, having slipped as low as $1,180.34 in the previous session. U.S. gold futures for December delivery fell 0.6 percent to $1,189.50.
Federal Reserve Chairman Jerome Powell last week said that the U.S. central bank plans grasdual increases to interest rates.
This could further boost the U.S. currency, making dollar-priced gold more expensive for holders of other currencies, potentially subduing demand.
"The main news in gold is still related to the Fed. Following Jerome Powell's speech (last week), the market is expecting one more rate hike in December and another three next year," said ActivTrades' chief analyst Carlo Alberto De Casa.
The Fed raised U.S. rates last week and said it planned four more increases by the end of 2019 and another in 2020, citing steady economic growth and a robust jobs market.
Higher U.S. interest rates tend to boost the dollar, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
"Sellers remain in control and it is quite technical trading at the moment. We are currently operating in a tight range of $1,181 - $1,193," said Saxo Bank analyst Ole Hansen.
"If we break below $1,181, there is a heightened risk of a move toward an August low of $1,160."
Gold has fallen more than 13 percent from its April high, largely because of the stronger dollar, which has been boosted by a vibrant U.S. economy and fears of a global trade war.
Investors have also opted to buy the dollar and U.S. Treasury bonds as safe investments instead of of gold.
Speculators raised their net short position in gold by 2,923 lots to 77,313 lots, the largest in three weeks, in the week to Sept. 25, U.S. Commodity Futures Trading Commission (CFTC) data showed.
Palladium dropped 2 percent to $1,051.49 an ounce after touching an eight-month high of $1,094.60 in the previous session.
Silver slipped by 0.6 percent to $14.51 and platinum was little changed at $811.70.
"Softer Chinese data released overnight has just removed some bids we saw coming in for semi and industrial metals last week," Saxo Bank's Hansen said.
Growth in China's manufacturing sector stalled in September as both external and domestic demand weakened, two surveys showed on Sunday, in a sign that U.S. tariffs are taking a toll on the economy.