Gold fell on Monday, drifting away from a more than three-month peak hit in the previous session, as the dollar strengthened and European stocks moved into positive territory.
Spot gold was down 0.3 percent at $1,230.08 an ounce at 1036 GMT, having touched its highest since July 17 on Friday at $1,243.32. U.S. gold futures were down 0.3 percent at $1,232 an ounce.
European shares opened higher on Monday as upbeat corporate reports and relief that Italy had avoided a ratings downgrade helped them rebound from a sell-off that had pushed them to levels not seen since December 2016.
Also denting bullion’s appeal was a stronger dollar, which edged back towards the 10-week high it hit on Friday against a basket of its key rivals on concerns over the global growth outlook.
A stronger dollar makes the metal more expensive for holders of other currencies.
“Gold is now increasingly in need of supporting fundamentals to carry it higher. This after the tailwind from short covering begins to fade given the sharp reduction witnessed during the past few weeks,” said Saxo Bank analyst Ole Hansen.
Hedge funds and money managers cut their net short positions in gold to the smallest since mid July, data showed.
“Recent buying interest has been predominately driven by the instigation of fresh long positioning and there is still scope for recent shorts to be squeezed on a move through $1,245, with further demand through $1,250,” traders at MKS PAMP said in a note.
Banks and brokerages have cut their average gold price forecasts for this year and 2019 after the metal slumped to 19-month lows in August, but they still expect prices to stage a modest recovery, a Reuters poll showed on Monday.
Among other precious metals, silver gained 0.2 percent to $14.64 per ounce.
Palladium, which hit a record $1,150.50 an ounce last week, was up 0.4 percent at $1,109.25 an ounce, while platinum climbed about a percent to $837.80 an ounce.
Palladium’s price premium over platinum will widen next year, with palladium set for its best year on record while platinum slumps to its worst performance since 2004, a separate poll showed.
