Gold slid to a seven-week low on Monday and headed for its biggest one-day loss in two months as the dollar rebounded and 10-year U.S. Treasury yields climbed, weighing on appetite for non-interest bearing bullion.
Gold ended June with its first monthly loss of the year after the strength it saw in early 2017 ran out of steam in the second quarter, dampened by a rise in bond yields.
The metal's decline picked up speed after it broke chart support at $1,234, its 200-day moving average. It rallied $50 an ounce to a seven-month high in the three weeks after breaking
above that level in May, but has since steadily fallen.
Rising bond yields and soft physical demand are weighing on interest in gold, Commerzbank analyst Carsten Fritsch said.
The link between gold and yields is currently stronger than the gold-U.S. dollar connection, he said. "This is due to the fact that the exit from ultra-loose monetary policy is not only related to the Fed anymore," he said.
European shares began the new quarter with solid gains, while the dollar lifted from nine-month lows as U.S. Treasury yields hit their highest since mid-May. Germany's 10-year government bond yield pulled back after last week's sharp selloff, but held near 3-1/2 month highs.
Gold failed to benefit from dollar weakness in the second quarter, as this was driven largely by expectations for tightening monetary policy outside the United States.
"Higher global rates would weigh on gold as we have highlighted on several occasions, the potential for higher EUR rates and the upward pressure this might have globally is a key risk that we are watching," UBS said in a note. "Ahead today, U.S. inflation data comes into focus given the read-through to real rates."
U.S. Mint sales of American Eagle gold coins totalled 6,000 ounces in June, down 92 percent from June 2016 and bringing the tally for the first half of the year to 192,500 ounces. The Perth Mint's gold sales fell 39 percent year on year.
Silver was down 2.84 percent at $16.10 an ounce. Silver was the worst performer of the major precious metals in the second quarter, ending the period down 9 percent.