Spot gold was down 0.2 percent at $1,211.16 an ounce by 0941 GMT after climbing as high as $1217.85 in early trade.
US gold futures dipped 0.3 percent at $1,219.50 an ounce.
"Overall the bears remain in control and they continue to increase their short positions - both the net and gross are hitting records," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Hedge funds and money managers added a hefty 13,931 contracts to their net short position in the week to July 31, bringing it to 41,087 contracts, the biggest since records became publicly available in 2006, data showed on Friday.
Gold has been in a downtrend since touching a peak of $1,365.23 on April 11. It has shed over 11 percent and hit a 17-month low on Friday.
"We bounced off the $1,205 level on Friday and that is just a red flag to the bears right now. They are taking aim at that level and gold is likely to struggle unless we see a clear change in the view on the dollar," Hansen added.
The dollar rose on Monday, edging towards a one-year high, as escalating trade war rhetoric between the United States and its trading partners helped the US currency.
Investors have largely been buying the dollar as a safe haven asset rather than gold as the US-China trade dispute escalates.
Chinese state media on Monday lambasted US President Donald Trump's trade policies in an unusually personal attack.
"The more expensive dollar is capping the rally in gold prices. Further downside for gold still appears to be possible especially if the dollar continues to rally," OCBC analyst Barnabas Gan said.