Gold fell to its lowest in 10 months on Monday as global equities strengthened as investors shrugged off worries of political instability in Italy, while U.S. Treasury yields rose after U.S. economic data.
Italian Prime Minister Matteo Renzi said he would resign after suffering a crushing defeat on Sunday in a referendum on constitutional reform, raising concerns of early elections in 2017.
Spot gold fell by as much as 1.6 percent to its lowest since February at $1,157 an ounce and was down 0.47 percent at $1,170.67 by 3:01 p.m. EDT. U.S. gold futures for February delivery settled at $1,176.50.
The benchmark 10-year U.S. Treasury yield rose, as the Institute for Supply Management said the pace of growth among domestic services industries accelerated more than forecast in November.
As gold pays no interest, the rise in returns from U.S. bonds is seen as negative for the metal.
"Investors are looking at the general appeal of the U.S. versus Europe and assessing where their money is going to give them a bigger return," said ICBC Standard Bank analyst Tom Kendall.
"Gold has done really well up until the last six months because investors weren't earning on cash above inflation but now U.S. 10-year yields are higher and real interest rates have become more positive hence gold looks less attractive because one can earn a return on cash elsewhere."
The metal was also under the pressure because of stronger European and U.S. shares, as investors were reassured by expectations the European Central Bank (ECB) would step in if needed. The next ECB policy meeting is on Thursday.
Higher appetite for risk curbs the appeal of assets viewed as safer, such as gold.
Gold fell more than 8 percent in November, hurt by a jump in the dollar and Treasury yields after Donald Trump's surprise election to the U.S. presidency led to speculation that his commitment to infrastructure spending would spur growth and inflation.
Prices had touched a two-year high in July as investors scoured for safe assets following Britain's vote to leave the EU and on uncertainty about U.S. interest rate increases.
"Markets expect the U.S. rate hike to take place this month ... investors look at the next big event, which could be a January or February rate hike," Natixis analyst Bernard Dahdah said.
Gold fell more than 1 percent on Monday as the euro slid against the dollar after Italian Prime Minister Matteo Renzi conceded defeat in a referendum over his plan to reform the constitution.
The political uncertainty in the euro zone earlier spurred safe-haven demand for gold, but the precious metal later surrendered gains to trade lower.