Gold prices fell more than 1 percent on Monday to a one-week low as investors sought refuge in the dollar, worried about a slide in global stock markets aggravated by concerns over China's economic growth. Spot gold was down 1.4 percent at $1,189.37 an ounce at 1506 GMT from an earlier $1,183.85, its lowest since Sept 28. US gold futures fell 1.1 percent to $1,192.30 an ounce.
Investor fears of higher US interest rates, growth concerns in China due to the trade dispute with the United States, emerging market weakness and an Italian budget row all combined to send equities sharply into the red.
The nervous mood was aggravated by China's central bank on Sunday cutting the level of cash that banks must hold as reserves, aimed at lowering financing costs. "People are nervous ... therefore you see quite a reaction on gold markets," said ABN AMRO analyst Georgette Boele.
Gold has fallen more than 12 percent from a peak in April largely due to the dollar's strength, which reflects a vibrant US economy, rising US interest rates and fears of a global trade war. A stronger dollar makes dollar-denominated gold more expensive for holders of other currencies.
"Investors are not sure about buying gold as it is unable to break above $1,210, a strong resistance," said Carlo Alberto De Casa, chief analyst at ActivTrades.
"The strong US dollar and expectations of more interest rate hikes are pushing gold down and scaring gold investors. Even the Italian risk and a weakness in equities is not pushing investors to buy gold."
The US unemployment rate fell to near a 49-year low, a government report showed on Friday, the latest in a string of positive data that could prompt the Federal Reserve to maintain a path of gradual interest rate increases. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion.
Despite the losses, gold has held in a $34 range for the last 1-1/2 months, which some analysts say suggests resilience due to safe-haven bids spurred by worries over the damage to emerging market economies from higher US interest rates.
"Weakness in emerging markets might bring in small bids for gold," said Nicholas Cawley, an analyst at DailyFX.com, adding that the "overriding factor is higher US interest rates and bond yields". Meanwhile, speculators cut their net short position in COMEX gold by 4,186 contracts to 73,128 in the week to Oct. 2. Spot silver fell by 2 percent to $14.29 and palladium declined 0.3 percent to $1,065.04. Platinum was down 1 percent at $812.60 an ounce.
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