Gold fell more than 1 percent on Monday, giving up the prior session's gains on pressure from the rising dollar, expectations for US interest rate hikes and as the market entered a holiday week. Spot gold was down 1.4 percent at $1,275.66 an ounce by 2:38 pm EST (1938 GMT), off Friday's peak of $1,297, its strongest since October 16. US gold futures settled down 1.6 percent at $1,275.30.
The US dollar touched its highest against a basket of major currencies in nearly a week, as the euro weakened amid political risks linked to German Chancellor Angela Merkel's failure to form a three-way coalition government. Global equities rose as confidence over economic growth around the world helped investors brush off concerns about the collapse of government talks in Germany.
"This reversal is not terribly surprising because you've entered a holiday week and didn't make much progress in that breakout," said Rob Haworth, senior investment strategist at US Bank Wealth Management, referring to the US Thanksgiving holiday on Thursday and failure to extend the November 17 rally to a one-month high.
"The dollar is strengthening ... and the odds of a rate increase are starting to rise. I think we've priced in December and you're starting to price in two or three next year." Silver was down 2.3 percent at $16.91 an ounce and platinum fell 3 percent to $922.30. Palladium eased 0.5 percent to $988.50 an ounce.
Traders said palladium could come under pressure from news that Norilsk Nickel is planning to boost purchases of palladium for its fund from Russian central bank reserves to help ease shortages in the market.
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