Spot gold stood at $414.30/415.10 per troy ounce by 1458 GMT, after hitting a near four-month low at $413 and compared with $415.20/416.00 late in New York on Friday.
"The short-term downtrend remains intact, with $410 as the target," a European dealer said.
"This (IMF proposal) is bruising sentiment massively and $412 support is quite a critical level - it's a trendline going back to early 2001," analyst Ross Norman of TheBullionDesk.com told Reuters.
A communiqué from the G7 meeting said the IMF had been asked to look at ways of using part of its 100 million ounces of gold holdings to help alleviate Third World poverty.
Analysts said outright sales were unlikely due to expected opposition from the United States, which has key voting rights within the IMF.
US Treasury Under-secretary John Taylor said the United States had other plans for alleviating poverty. Asked about using IMF gold stocks, he said: "The United States is not convinced that's the necessary way to do it."
Yet bullion dealers have been spooked as IMF sales would weigh heavily on a market that has started 2005 weakly after a three-year bull run that saw prices scale a 16-1/2-year peak at $456.75 in December.
The greenback briefly rose to a three-month high against the euro after China told the G7 it was committed to revaluing its currency but would not do so soon. The euro was last at $1.2832.
John Reade of UBS Investment Bank said the prospect of IMF sales would keep gold under pressure until the IMF's April meeting, which was due to discuss debt relief.
"While we do not expect IMF gold sales to materialise, traders are unlikely to trust this judgement until greater clarity is forthcoming on the issue and gold may weaken further," he said in a daily report.
In other precious metals silver firmed slightly to $6.63/6.66, versus late New York levels on Friday of $6.61/6.64.
Platinum firmed slightly to $867.00/871.00 from $862.00/866.00 previously, while palladium moved down to $178.00/183.00 from $180.00/184.00.