SINGAPORE: Gold edged towards a four-month low on Monday on fears of an early end to US stimulus measures and as holdings of the biggest bullion-backed exchange-traded fund fell the most in three weeks.
Gold was also weighed down by gains in Asian shares and a drop in brent crude following a breakthrough nuclear deal between world powers and Iran.
Spot gold had dropped 0.1 percent to $1,241.51 an ounce by 0316 GMT, not too far from a four-month low of $1,236.29 hit last week. The metal declined to a session low of $1,237.10 earlier on Monday.
"The bears are still in control," said one Hong Kong-based precious metals trader. "The key driver is QE tapering with markets eyeing some action at the December or January meeting."
Investors fears the US Federal Reserve could begin rolling back its monthly bond purchases, also known as quantitative easing, as early as next month on the back of strong US economic data.
The US central bank's $85 billion in monthly bond-buying has boosted gold prices in recent years as it increases the metal's appeal as a hedge against inflation.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 4.50 tonnes to 852.21 tonnes on Friday, their lowest since February 2009. That was the sharpest drop since Nov. 1.
"Recently, risk-partiality has increased following gains in assets such as equities," said Chen Min, a precious metals analyst at Jinrui Futures in Shenzhen.
"We believe that investors will lose interest in gold and rush to risky assets."
Traders were also eyeing developments in the East China Sea, after Japan and ally the United States sharply criticized China's move to impose new rules on airspace over islands at the heart of a territorial dispute with Tokyo.
Any escalation in tensions would increase gold's safe-haven appeal and push up prices, traders said.
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