Gold settled lower on Monday, on course for its largest annual loss in 32 years, as thin pre-holiday trade and signs of an improving U.S. economy kept investors fretting over the impact of the Federal Reserve's stimulus tapering.
Gold fell 3 percent last week, its biggest weekly loss in a month, after the Fed's decision last week to start scaling back its bond-buying stimulus, which was followed by upbeat GDP data.
"Investors remain negative towards gold for now as there is no more uncertainty around the Fed taper,'' MKS SA vice president Bernard Sin said.
"The Fed QE tightening ... will lead to a gradual rise in interest rates, which will eventually make the cost of carrying gold a lot higher ... and that suggests further liquidation.''
Chart: Precious Metals
Spot gold fell 0.3 percent to $1,199 an ounce, while U.S. gold futures for February delivery settled $6.70 lower at $1,197.00 an ounce.
"I would argue that there is support at $1,190 ... but there may be more downside as it doesn't take much to move the market in thin holiday trading,'' VTB Capital analyst Andrey Kryuchenkov said.
Gold hit its lowest since June on Friday at $1,185.10 an ounce, closing in on a 3-1/2-year low touched earlier that month, after the Federal Reserve's first step away from ultra-loose monetary policy further undermined the investor case for holding bullion.
Gold was the major financial benchmark hardest hit by the U.S. central bank's taper, which will raise the opportunity cost of holding non-yielding gold.
—By Rueters