Gold fell more than 3.5 percent to a one-week low on Monday, as sliding oil prices and a rising dollar prompted investors to cash in on bullion's recent lightning rally to 28-year highs.
Dealers also pointed to some influence from a ripple of risk aversion that ran through equity and foreign exchange markets with a knock-on effect on gold prices.
Spot gold fell as low as $802.60 an ounce before paring losses slightly, against Friday's quote of $832.30/833.10 late in New York and last week's $845.40 -- the highest since January 1980.
Oil prices fell almost 2 percent to $94.44 per barrel after Saudi Arabia said OPEC would discuss boosting oil output at an upcoming meeting to cool surging oil prices -- taking some shine off gold's role as a hedge against oil-led inflation.
"I think that what we saw today is some long liquidation after the most recent rally. This came across the whole complex including oil and base metals. Additional pressure came from a weakening euro," said Alexander Zumpfe, metals trader at Heraeus Precious Metals.
Currency fundamentals played against gold and other dollar-priced commodities as euro fell almost 1 percent versus the dollar, making them more expensive for non-U.S. investors.
The euro also was under pressure from a broadly rising yen, which sprinted to an 18-month high against the dollar as investors unwound risky carry trades, concerned about further fallout from the U.S. subprime mortgage crisis.
Gold traditionally has been used by investors as protection against economic and political uncertainty. But it can sometimes behave much like other financial assets because of the growing role of commodities in diversified portfolios.
"With positioning still high, gold remains vulnerable to further losses although the key here will be the direction of the dollar," John Reade, metals analyst at UBS Investment Bank, said in a daily research note.
"If risk aversion triggers further dollar weakness, then gold should hold quite well and may even move higher on safe haven buying. But if risk aversion sees some dollar repatriation, then further losses will materialize."
However traders were not yet ready to throw in the towel on gold's pursuit of further gains to a record $850 per ounce -- last seen in January 1980.
"I wouldn't say that this is already the end of the rally for now but just a part of a healthy consolidation," Heraeus's Zumpfe said.
In other bullion markets, December U.S. gold futures fell $27.50 an ounce to $807.60, while the Tokyo gold contract for October 2008 delivery ended down by the 120 yen daily limit at 2,923 yen per gram.
The market shrugged off news that 10,000 miners were on strike at South African mines including Anglo Platinum and Impala Platinum on Monday. The firms said their output had not been affected.
In other metals, platinum fell to a one-month low of $1,385 per ounce, having hit a record $1,484 last week. It was last quoted at $1,386/1,390 from $1,427/1,431 quoted late in New York on Friday.
The market awaited a key report from major platinum refiner Johnson Matthey on Tuesday for key price outlooks, demand and consumption trends.
Silver also fell sharply in tandem with gold to $14.77/14.82 an ounce from $15.47/15.52 in New York.
Palladium had eased to $364/368 from $369/373 in the U.S. market on Friday.