Gold prices retreated on Monday as the dollar benefited from safe-haven buying driven by fears over a second wave of coronavirus infections.
Spot gold was down 0.3% at $1,695.99 per ounce by 11:23 a.m EDT (1523 GMT). US gold futures fell 0.9% to $1,697.80 per ounce.
"We're seeing short-term demand for dollar that's very strong," said Daniel Ghali, commodity strategist at TD Securities. He added gold is also caught between prospects of massive monetary inflation, which should support prices, and deflationary pressure from weak economic data.
"But in the longer term, this macro environment should actually lead to a lower dollar and that's part of the positive gold story," Ghali added.
Dampening demand for gold, the dollar, also considered a safe store of value rivalling gold in times of economic and political uncertainty, rose on warnings of a second wave of COVID-19 infections as global lockdowns ease.
Germany reported that new infections were accelerating after initial steps to ease its lockdown, triggering a global alarm even as businesses opened from Paris to Shanghai. South Korea also saw infections rebound.
However, market participants said gold's trajectory would be positive in the longer term as the metal tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement.
A string of poor US economic readings last week underscored the impact of the virus and lifted expectations of further stimulus measures from the Federal Reserve.
"Gold prices could climb noticeably if speculative investors were to jump on the bandwagon - and there is certainly good reason for them to do so," Commerzbank analysts said in a note.
"They just need to look at the extremely expansionary measures taken by central banks and governments, which will lead to a massive increase in balance sheets and national debt levels."
Speculators reduced their bullish positions in COMEX gold contracts in the week to May 5, the US Commodity Futures Trading Commission (CFTC) said on Friday.
On the physical front, gold demand improved in top hub China this week as buyers took advantage of hefty discounts, while activity remained muted in other hubs due to lockdowns and holidays.
Among other precious metals, palladium fell 1% to $1,863.42 an ounce, while platinum was down 0.4% to $762.01.
Silver was lower at 0.5% to $15.38.
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