LONDON: Gold dropped 1.2 percent on Monday, as the dollar strengthened and investors awaited a series of U.S. data later in the week that could provide clues on when the Federal Reserve will begin scaling back its monetary stimulus programme.
U.S. data including nonfarm payrolls, third quarter GDP and manufacturing PMI are due this week, giving more insight into the strength of the world's biggest economy.
Gold investors were concerned that strong recovery could prompt the Fed to begin cutting back its $85 billion in monthly bond purchases, which would further hurt non-interest-bearing assets like bullion.
The U.S. central bank meets on Dec. 17-18, when it could decide the fate of its stimulus.
"We are starting the week and month on a weak footing, carrying on a little bit of the themes that we left last week... the focus is back on the U.S. data, with the non-farm payrolls on Friday," Saxo Bank senior manager Ole Hansen said.
Spot gold fell as much as 1.2 percent to a one-week low of $1,237.04 an ounce and was down 1.1 percent to $1,237.60 by 1039 GMT. It ended November trading on Friday down 5.4 percent, its biggest monthly decline since June and its third consecutive month of losses.
U.S. gold futures fell 1.1 percent to $1,235.80 an ounce.
Technical support for the metal is pegged at last week's 4-1/2 month low of $1,227.34 an ounce and then $1,200, traders said.
The dollar rose 0.2 percent against a basket of currencies, while U.S. Treasury yields rose close to 2.8 percent.
As gold pays no interest, the rise in returns from U.S. bonds and other markets is seen as negative for the metal.
"There is also a bit a euro/dollar weakness, which is weighing gold down," Hansen said. "Last week bond yields and the dollar were weak but we didn't get enough support and that's telling us that overall sentiment remains weak and there's not really a strong incentive to buy at the moment."
The metal has lost over a quarter of its value this year due to record outflows from gold-backed exchange-traded funds (ETFs) as signs the world's economy was at least stabilising pushed investors to shift their money to rallying equities.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell more than 450 tonnes this year to their lowest level since early 2009 at 843.21 tonnes this year.
"...If equity markets remain firm and if prices breach $1,200, the weakness (in prices) is likely to be exacerbated...," Barclays said in a note.
Physical demand has picked up at lower price levels but not to the same extent as earlier this year when a $200-an-ounce drop in two days prompted record levels of buying.
Silver fell 1.3 percent to $19.96 an ounce. The metal posted an 8.6 percent monthly fall in November, the worst since June.
Spot platinum fell 0.1 percent to $1,355.70 an ounce and spot palladium lost 0.6 percent to $714.25 an ounce.
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