Gold ended at its lowest level of the year, thus far, on Tuesday as the dollar climbed, posting its sharpest monthly loss since June 2013 and the first quarterly loss this year on expectations of further gains in the U.S. currency.
"The pressure is definitely on for gold to end the year in the red," said Howie Lee, investment analyst at Phillip Futures.
"We see little in the way to stop gold's downward slide, given that the Fed has made clear its intention to hike (rates) sooner than later and the Ukraine tensions have reached a fragile ceasefire," Lee said, adding that a strong dollar will also weigh.
U.S. gold futures for December delivery settled $7.20 lower at $1,211.60 an ounce, its lowest settle since December 31. The precious metal lost about 6 percent for the month and dropped 8.4 percent for the third quarter, which ended Tuesday.
was last down 0.6 percent at $1,208 an ounce, after dipping in the last two sessions.
The U.S. Federal Reserve indicated earlier this month that it could raise borrowing costs faster than expected when it starts moving, which could boost the dollar and hurt non-interest-bearing bullion.
The dollar climbed to a four-year peak against a basket of major currencies in September, helped by strong U.S. economic data and the Fed's outlook on higher interest rates. It is on track to post its biggest monthly gain in well over a year.
A stronger greenback makes the dollar-denominated precious metals more expensive for holders of other currencies. Investors tend to withdraw from commodities and emerging market assets to seek higher yields in U.S. assets when the dollar gains.
Investors were also watching political unrest in Hong Kong for any worsening of tensions as that could lead to safe-haven bids for gold. Equities have already taken a hit from the protests.
Tens of thousands of pro-democracy protesters blocked Hong Kong streets on Tuesday, maintaining pressure on China as it faces one of its biggest political challenges since the Tiananmen Square crackdown 25 years ago.
Some Hong Kong dealers were worried that retail sales of jewelry could take a hit, especially during the one-week National Day holiday that begins on Wednesday.
The holiday is usually a busy period that retailers rely on for a boost to their sales due to the influx of tourists from China.
"Some jewellery shops have been closed completely or some are closing early due to the protests," said a dealer in Hong Kong. "It does look like there will be a small impact on sales if the protests continue for long."