Gold fell more than 1 percent on Monday as the dollar climbed on increasing prospects that the Federal Reserve may start raising interest rates this year.
Chairwoman Janet Yellen said on Friday an increase in the Fed's benchmark rate "may well be warranted later this year" given sustained improvement in U.S. economic conditions.
Gold, which does not pay any interest, has benefited from a low interest rates environment and central banks' accommodative policies in the years following the 2008-2009 credit crunch.
Spot gold fell as much as 1.4 percent to a one-week low of $1,182.05 an ounce, slightly cutting losses to trade down 1 percent at $1,187 by 1410 GMT.
U.S. gold futures for April delivery dropped 1.1 percent to $1,186.50 per ounce.
Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could further reduce demand for assets perceived as safer such as gold. A stronger dollar also makes gold more expensive for holders of other currencies and typically erodes its appeal.
The metal had risen for seven consecutive sessions, touching its highest since March 2 at $1,219.40 on Thursday, reacting to a Fed March policy statement that was perceived as more dovish than expected.
It was headed for a second consecutive monthly drop in March.
U.S. jobs data on Friday will be a major event this week and a robust report could see investors position for tighter monetary policy sooner rather than later.
But analysts agree that the Fed will be anything but aggressive in its rate hike path, with many looking at the first rate increase happening in September instead of June as they predicted earlier.
Hedge funds and money managers slashed their bullish bet in gold for the eighth straight week, data showed on Friday.
Investors were also keeping an eye on tensions in Yemen, which aided gold's climb last week, and uncertainty over Greece's debt talks.
Gold is usually seen as an insurance against risk.
Spot silver fell 1.1 percent to $16.74 an ounce, while platinum dropped 1.5 percent to $1,118.88 an ounce and palladium was down 0.8 percent at $733.50 an ounce. (Reuters)
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