Gold fell 1 percent on Monday, touching a 2½-week low, as the dollar strengthened and U.S. Treasury yields rose ahead of a two-day Federal Reserve meeting, while a world stock market index surged to a record and Wall Street also hit new highs.
Easing tensions on the Korean peninsula also reduced gold's safe-haven bid. On Sept. 8, gold's session high of $1,357.54 an ounce was the highest in 13 months. On Friday, U.S. data showed hedge funds and other speculators had raised net long positions in the precious metal for nine straight weeks.
"There was a lot of speculative froth in the gold market which seems to have receded now," Commerzbank analyst Carsten Fritsch said in a telephone interview. "Expectations that the Fed will raise U.S. interest rates argue for a correction here."