Gold edged lower from a more than six-month peak hit early on Monday and was poised for its first annual decline since 2015 after losing out this year to dollar strength linked to the U.S.-China trade conflict and rising interest rates.
Spot gold fell .06 percent to $1,279.89 an ounce at 1:52 p.m. ET, having hit its highest since June 15 earlier in the session. U.S. gold futures settled at $1,281.30, down $1.70.
"The equity markets are off to a very good start and that is putting a little bit of pressure on gold market," said Phil Streible, senior commodities strategist at RJO Futures in Chicago.
"Gold has had an incredible run in the month of December, so we are seeing a small bit of profit-taking."
Spot prices have gained about 5 percent so far this month, the most since January, but are still down 1.7 percent in the year to date.
"Gold started well in 2018, but a recovery in the U.S. dollar weakened prices and uncertainty on the U.S-China trade front weakened the yuan, further pulling gold down," said ABN AMRO analyst Georgette Boele.
Some stabilisation in the yuan and weakness in the dollar has helped the recent recovery in gold, she said, which has put the metal on track for its best December in a decade. "We expect gold prices to hit $1,400 next year," she added.
The dollar is set to close the year up nearly 5 percent against its rivals, lifted by trade tensions and rising interest rates.
Political and economic considerations will support prices into the first quarter of 2019, said Benjamin Lu Jiaxuan, commodities analyst at Singapore-based brokerage firm Phillip Futures.
The outlook for the dollar is also more subdued going into 2019, with growing expectations that a three-year rate-hiking cycle in the United States has come to a close. Markets currently expect no rate hikes next year.
Elsewhere, auto catalyst metal palladium was up .9 percent at $1,264.90 an ounce, taking its gain for the year to 18.5 percent and making it the best-performing of the major precious metals for the third year in a row.
This year it also surpassed gold for the first time since 2002 on strong demand from makers of catalytic converters.
"The key driver in this strength has been growing demand from the auto sector with stricter pollution standards in China increasing the amount of palladium used in auto catalysts," ING said in its commodities outlook for next year.
Silver rose .73 percent to $15.45 an ounce in the session but was down 9.3 percent for 2018.
Platinum rose by .47 percent to $793.20, making little impact on a decline of about 14 percent for the year.