Gold prices slipped as much as 2 percent on Monday as the dollar strengthened and investor appetite for risk increased, but the metal remained above $1,200 an ounce after a rally that pushed prices to one-year highs this month.
Concern over financial instability and the repricing of expectations for U.S. interest rate rises, has helped gold outperform most assets so far this year with a 15 percent gain.
Spot gold was down 1.69 percent at $1,207.06 an ounce, off a session low of $1,201.63.
U.S. gold futures for April delivery settled down 1.7 percent to $1,210.10.
ETF inflows
"I see this is a little bit of profit taking directly associated with the advancement in the stock market today," said Jeffrey Sica, president and chief investment officer at Sica Wealth Management.
The dollar rose 0.8 percent against a basket of leading currencies, supported by strong U.S. data on Friday, and European shares jumped to multi-month highs. Oil prices soared 7 percent.
Some analysts said gold prices are vulnerable to a correction if fears over the global economy fade and U.S. interest rate hikes return to the table.
ETF inflows
But investor sentiment remained largely bullish and was evident in fund flows. SPDR Gold Trust, the world's top gold exchange-traded fund, on Friday recorded the biggest single-day inflow since August 2011.
The fund's inflows since the beginning of the year have already surpassed the outflows for the whole of 2015. Speculators increased their bullish bets in COMEX gold futures and options to their highest in nearly four months in the week to Feb. 16.
Bank of America Merrill Lynch said on Friday investors shoveled $3.2 billion into gold, the biggest two-week gold inflow since May 2010.
"Increases in ETF (exchange-traded fund) holdings continue to support gold higher, while we have seen some of this buying momentum offset by reductions in TOCOM positioning and recent selling in China," said MKS Group trader Sam Laughlin, referring to the Tokyo Commodity Exchange.
Top consumer China has been selling gold since its return from a week-long holiday last Monday, a sign Chinese investors do not expect prices to go much higher and cannot be counted on to support the market.
Silver futures fell 1.29 percent to $15.18 an ounce, while platinum futures fell 1.9 percent to $927.90 and palladium slipped by 0.4 percent to $497.80.