Traders have priced in a 70-percent chance that the Fed will hike rates at a Dec. 13-14 meeting, up from 66 percent early Friday, according to CME Group's FedWatch tool.
Spot gold had dropped 0.4 percent to $1,256.66 an ounce. U.S. gold futures also fell 0.03 percent to $1,259.70 an ounce.
Bullion touched a four-month low of $1,241.20 an ounce on Friday and registered its biggest weekly drop for 11 months, down 4.5 percent, after forecast-beating U.S. data and comments from Fed officials saying there was a strong case for raising rates.
"Funds have been quite reluctant to let go of the longs, but once the $1,300 level was broken, the floodgates just opened," Saxo Bank senior manager Ole Hansen said.
"We are highlighting the risk that the dollar will move higher because of higher interest rates."