Gold dropped for a second straight session on Monday, slipping further from a three-week high, after Federal Reserve Chair Janet Yellen signalled that the US central bank may be on course to raise interest rates later this year.
Bullion may be set to give up recent gains fuelled by the Fed's March policy statement that it was prepared to move more slowly in hiking US rates than the market expected. The metal rose for seven consecutive sessions after the Fed's meeting this month in its longest rally since 2012.
On Friday, Yellen had said an increase in the Fed's benchmark rate "may well be warranted later this year'' given sustained improvement in US economic conditions.
"Yellen's latest comments might just change the course of gold and cause a downward movement in the price from hereon,'' said Howie Lee, analyst at Phillip Futures, who sees gold dropping to as low as $1,180.
Spot gold, US gold
Spot gold was off 0.5 per cent at $1,193.10 an ounce by 0225 GMT, after rising for a second week in a row last week. It touched $1,219.40 on Thursday, its loftiest since March 2.
Bullion is headed for a second consecutive monthly drop in March as a looming US rate hike dims the appeal of a non-interest bearing asset.
US gold for April delivery dropped 0.6 per cent to $1,192.50 an ounce.
But analysts agree that the Fed will be anything but aggressive in its rate hike path, with many looking at the first rate increase happening in September instead of June as they predicted earlier.
"Given falling oil prices and slowing growth globally they cannot afford to raise rates too early so I think the first rate hike will happen in September,'' said Lee at Phillip Futures.
Mizuho Bank said Yellen's latest remarks showed the Fed remained "delicately determined'' with regard to raising rates.
"Yellen was decidedly non-aggressive on her views of the underlying, residual slack from the financial crisis that requires a gradual move up in equilibrium real Fed rates,'' the bank said in a note.