Spot gold slipped 0.6% to $4,170.62 per ounce, having hit its highest level since October 2 earlier in the session. US gold futures for December delivery dropped 0.5% to $4,195.10 per ounce.
The US government and bond market are closed on Monday for Columbus Day.
“We’re seeing some selling pressure in gold because the dollar is near a one-and-a-half-year high,” said Jim Wyckoff, a market analyst at American Gold Exchange. An escalating Middle East conflict kept investors wary.
Investors would look out for remarks from Fed Chair Kevin Warsh, along with key inflation data, later this week to gauge future monetary policy.
The US Consumer Price Index report is due on Wednesday, followed by the Producer Price Index and retail sales data on Thursday.
“I don’t think (the reports) are going to show any signs of easing in inflation, and they would probably lean bearish for the metals market,” Wyckoff added.
Markets largely see the Fed keeping interest rates on hold later this month, but assign 87% probability of a hike by December, according to CME’s FedWatch tool.
In a high-interest-rate environment, investors tend to favour yield-bearing assets over gold.
Oil prices rose to near two-week highs on Monday as attacks on Saudi Arabia overshadowed possible further supplies to the market after US President Donald Trump hailed fresh Russian diesel exports and a Russia-Ukraine energy ceasefire.