Gold fell on Monday as downward pressure from a strong dollar outweighed support from unrest in Hong Kong, which hit global shares and led to some demand for the metal. Spot gold was down 0.2 percent to $1,217.10 an ounce by 1422 GMT, while US gold futures gained $2.30 to $1,217.60 an ounce. Cash prices had reached a nine-month low of $1,206.85 on Thursday, before recovering slightly.
The dollar was unchanged against a basket of major currencies and still close to a four-year peak hit earlier in the day as the market looked ahead to a series of important economic data, culminating in the release on Friday of US September non-farm payrolls. The bigger impact on gold prices could still come from US data as market players seek to gauge the strength of the economy and its impact on Federal Reserve policy.
Strong economic data could prompt the US central bank to raise interest rates faster and sooner than expected, which could boost the dollar and hurt non-interest-bearing bullion. "There is some consolidation going on now, and $1,220 or just below that appears to be something of a support level, the market is currently in wait-and-see mode with the big data releases later this week," Mitsubishi Corp strategist Jonathan Butler said.
"It's hard to see any major upside from here. From a macro point of view, the attention is pretty much focused on the strength of the US economy and the dollar." On Monday, the pressure on gold from a broadly strong dollar was mitigated by a fall in European and US equities after Hong Kong riot police advanced on pro-democracy protesters in the worst unrest since China took over the former British colony two decades ago. Gold is traditionally seen as an alternative investment during times of political instability.
Unrest in Hong Kong, however, also could hit retail sales in the region, a hot spot for tourists from mainland China, especially during the one-week National Day holiday that begins on Wednesday, bullion dealers said. "There will definitely be some impact on gold retail sales," said Dick Poon, general manager of refiner and dealer Heraeus Metals in Hong Kong.
"Usually there are a lot of Chinese tourists that come to Hong Kong for the holiday and end up buying jewellery, but this time they might be turned off by the protests." China is the world's biggest buyer of gold, and a drop in consumer demand there could undermine any rally in gold prices. As a gauge of wider investor sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.20 tonnes to their lowest since December 2008 at 772.25 tonnes on Friday.
Hedge funds and money managers cut their bullish futures and option bets in gold to their smallest since January in the week to September 23, the Commodity Futures Trading Commission said on Friday. Among other precious metals, silver fell 0.9 percent to $17.46 an ounce, just above a four-year low of $17.30 hit on September 22. Platinum was unchanged at $1,297.00 an ounce, after earlier hitting its lowest since June 2013 at $1,289.90. Palladium gained 1.2 percent at $781.50 an ounce.