NEW YORK: Gold fell on Monday, retreating from the previous session's nearly seven-month high as broadly lower crude oil and grain prices prompted investors to take profits.
Palladium dropped 4 percent on signs of platinum output returning to normal in top producer South Africa, triggering heavy speculative selling.
Traders said that Tuesday's US COMEX gold option expiration could increase volatility, while open interest in US gold futures rose to a one-year high for a third consecutive session.
However, bullion's rally is showing signs of fatigue after five straight weeks of higher prices. Repeated failures to break above technical resistance to set a new 2012 high above $1,790 an ounce also prompted some investors to lessen their bullish bets.
"There is no question that gold is consolidating its recent gains, but every dip seems to be bought," said Anthony Neglia, president of Tower Trading and COMEX gold options floor trader.
Gold could come under pressure as current prices may not reach the popular $1,800 calls at Tuesday's option expiry, and that could prompt some disappointed futures investors to sell, Neglia said.
Spot gold was down 0.6 percent at $1,762.06 an ounce by 11:57 a.m. EDT (1557 GMT). On Friday, gold hit a high of $1,787.20, just short of this year's high of $1,790.30 reached on Feb. 29.
US COMEX gold futures for December delivery were down $13.30 an ounce at $1,764.70, with trading volume in line with its 30-day average.
COMEX futures' open interest, which measures the total outstanding long and short contracts, rose to a one-year high at 488,070 lots as of Friday. Open interest of US gold futures has gained about 25 percent in the past 30 days.
GOLD ETF HOLDINGS APPROACH RECORD
Despite Monday's pullback, the price of gold has gained more than 10 percent after the Federal Reserve earlier this month said it would buy $40 billion a month in mortgage-backed debt until the job market outlook improves substantially.
"A lot of (investors) bought ahead of the announcement, and now they're selling out again to lock in the gains," HSBC analyst Howard Wen said.
Holdings of gold-backed exchange-traded funds tracked by Reuters rose by nearly 330,000 ounces on Friday to 73.748 million ounces, climbing back towards last week's record high. The bulk of inflows were seen into the world's largest gold ETF SPDR Gold Trust..
Among other precious metals, silver was down 1.4 percent at $34.94 an ounce.
Platinum fell 1.3 percent at $1,615.75 an ounce, while palladium slid 4.2 percent at $640.52 an ounce, on track for its biggest one-day drop since early March.
The premium added to platinum group metals by labor unrest in South Africa has shrunk, analysts said. Weeks of sometimes violent protests killed 45 and sent platinum to multi-month highs.
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