Gold fell more than 1 percent to a fresh three-month low on Monday as the dollar's rally against a basket of major currencies decreased bullion's appeal as a currency hedge.
The dollar index rose 0.3 percent to its highest in over a year as sterling plunged on fears over the outcome of Scotland's upcoming independence referendum and the Australian and Brazilian currencies also dropped.
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Safe-haven buying also dipped after a ceasefire between Ukraine and pro-Russian rebels took effect on Friday, in a move toward ending a conflict that caused the sharpest confrontation between Russia and the West since the Cold war.
Traders said, however, gold's break below its key 200-day moving average last week and a 3 percent pullback in the last four sessions could trigger renewed interest.
"Large players are using the drop as an opportunity to position themselves for whatever they think the next move for gold will be," said Andrew Chanin, CEO of PureFunds in New York, which runs the ISE Junior Silver ETF.
Spot gold was down 1.2 percent to $1,253.91 an ounce by 3:06 p.m. EDT (1906 GMT), having earlier traded as low as $1,251.24, marking the lowest since June 10.
U.S. COMEX gold futures for December delivery settled down $13 an ounce at $1,254.30, with trading volume in line with its 30-day average, preliminary Reuters data showed.
On Friday, the yellow metal ended higher after disappointing U.S. payrolls data tempered speculation the Federal Reserve will raise interest rates any time soon.
But some analysts stressed that economic optimism fueled by a string of positive U.S. economic data had sharply lessened interest in gold.
"The weaker jobs report did not wobble the dollar significantly ... finiancial players and investors in the West stopped buying into gold some time ago and it's still difficult to see them get back into the market when you have much better returns elsewhere," VTB Capital analyst Andrey Kryuchenkov said.
Among other precious metals, spot silver fell 1 percent to $18.95 an ounce. Platinum dropped 0.7 percent to $1,391.20 an ounce, while palladium was down 0.4 percent to $880.70 an ounce.
In coin investment news, the U.S. Mint said on Monday it will cease accepting dealer orders for its American Eagle platinum bullion coins after Oct. 1 as demand tumbles.
(By Frank Tang and Clara Denina; Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy, David Goodman and Tom Brown)