"The Fed raising the rates is certainly not electrifying news for the precious metal, which is on track to extend its biggest weekly decline since April," AvaTrade chief market analyst Naeem Aslam said.
"Yellen last week has confirmed that she is still confident that the rates will rise this year and (gold) traders are not fond of this news at all."
The prospect of higher rates later in 2015 boosted the dollar to its highest in a month against a basket of major currencies on Monday. Stronger-than-expected underlying U.S. inflation and persisting Greek debt worries also supported the greenback.
A stronger dollar makes gold more expensive for holders of other currencies, while diminishing the metal's appeal as an hedge against risk.
In the physical markets, gold demand across Asia was soft as investors channel their money towards higher-yielding stock markets.
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Indian gold jewellery demand in the second half of the year could take a hit as the Hindu calendar shows the number of dates seen as being auspicious for weddings will drop 40 percent in the second half from a year earlier.
In other Asia-related news, China has established a fund that is expected to raise about $16 billion for gold-backed investment as part of its "Silk Road" initiative to develop trade and transport infrastructure across Asia and beyond, official media reported.
Silver was down 0.7 percent at $16.99 an ounce, after falling 2.2 percent last week. Platinum dropped 0.1 percent to $1,143.88 an ounce and palladium fell 0.7 percent to $774.98 an ounce.