Gold prices edged lower on Monday as increasing expectations that the U.S. Federal Reserve will not aggressively cut interest rates later this month boosted the dollar, making gold expensive for holders of other currencies.
"With the strong jobs report the bets on 50 basis point rate cuts have dropped from almost 30% to 2%. The fact is that the runaway projections of interest rate declines are not going to happen and that's what is hurting gold," INTL FCStone analyst Edward Meir said.
Stronger than expected jobs data reported on Friday reduced the likelihood of a steep rate cut at the Fed's July 30-31 meeting and lifted the dollar to three-week highs.
However, the central bank was still expected to cut rates by a quarter point, given modest wage gains and other economic data suggesting the U.S. economy was losing steam.
Markets are now looking ahead to Fed Chairman Jerome Powell's semi-annual testimony to the U.S. Congress on the economy this week for clues on the near-term outlook for monetary policy.
Gold hit $1,438.63 for the first time in six years last month and has been trading above key technical levels, supported by expectations of a rate cut by major central banks and lingering concerns about the global economy.
"Continuing tensions with Iran and headlines about central banks around the world being strong buyers of the yellow metal are supporting prices," said David Meger, director of metals trading at High Ridge Futures.
The Chinese central bank increased its gold reserves for a seventh straight month in June, data showed. China is the world's biggest consumer of the yellow metal.
Adding to existing tensions between the United States and Iran, Tehran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning "to be careful" from U.S. President Donald Trump.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.18% to 796.97 tonnes on Friday from 798.44 tonnes on Wednesday.
Among other precious metals, silver gained 0.4% to $15.03 per ounce, while palladium dipped 0.1 % to $1,565.77 per ounce and platinum rose 1.4% to $815.62 per ounce.