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imageLONDON: Gold slid around 1 percent on Monday after Iran and six world powers sealed a deal to curb its nuclear programme, which eased political tensions, drove oil prices lower and lifted the dollar and equities.

Bullion was also weighed down by fears of an early end to U.S. stimulus measures and following the biggest drop in three weeks in holdings in the biggest bullion-backed exchange-traded fund.

Spot gold fell as much as 1.2 percent to its lowest since July 8 at $1,227.54 an ounce in earlier trade and was down 0.9 percent at $1,231.66 by 1056 GMT.

U.S. gold futures fell 1 percent to $1,231.20 an ounce.

The dollar rose 0.3 percent against a basket of currencies, while European shares rose after an interim agreement halted Iran's most sensitive nuclear activity and suspended some U.S. and EU sanctions on Iran's economy for an initial six-month period.

The easing of political tensions also weighed on oil prices, with Brent crude down around $2 a barrel, its biggest drop in more than three weeks.

Gold is usually seen as an hedge against oil-led inflation.

"In general, you don't have a lot going for gold at the moment, and the weakness we are seeing today, probably due to some drag from lower oil prices after the Iran deal, is just another short-term factor why you continue to see headwinds," Bank of America Merrill Lynch analyst Michael Widmer said.

"The big issue is sill the monetary tightening in the U.S. and that hasn't gone away as a problem for gold and as soon as it comes back you will get further downward pressure on prices."

STIMULUS FEARS LINGER

Investors are concerned that the U.S. Federal Reserve could begin rolling back its monthly bond purchases, known as quantitative easing, as early as next month on the back of strong U.S. economic data.

"Overall sentiment remains bearish, and much will still depend on macro data with bearish implications for gold into 2014 as currency yields gain ground and players turn away from gold in favour of better returns, with little need for inflation or safe-haven hedging in the next year," VTB Capital said.

The U.S. central bank's $85 billion in monthly bond-buying has boosted gold prices in recent years by increasing its appeal as a hedge against inflation.

Traders were also watching developments in the East China Sea after Japan and the United States sharply criticised China's move to impose new rules on airspace over islands at the heart of a territorial dispute with Tokyo.

Any escalation in tension could increase gold's safe-haven appeal, traders said.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund and the best measure of investor sentiment, fell 4.50 tonnes to 852.21 tonnes on Friday, their lowest since February 2009. That was the sharpest drop since Nov. 1.

Silver was down 0.7 percent at $19.72 an ounce, having touched its lowest since mid-August at $19.54 earlier.

Spot platinum rose 0.5 percent to $1,385.00 an ounce, while spot palladium was steady at $712.74 an ounce.

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