Spot gold was down 0.1 percent at $1,318.84 an ounce by 1:41 pm EST (1841 GMT), while US gold futures for February delivery settled down $1.90, or 0.1 percent, at $1,320.40 per ounce. "Gold has been following the dollar pretty heavily. We are watching the dollar relative to US deficits," said Rob Haworth, senior investment strategist for US Bank Wealth Management. "Higher deficits, which it looks like tax cuts will do, means a weaker dollar. So there's room for gold."
Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. Market participants are awaiting US Consumer Price Index (CPI) data later this week, which are expected to show inflation likely increased 0.2 percent in December after rising 0.1 percent in November.
"Investors think the Fed is stuck on a path of three rate hikes right now. Everyone's waiting to see what that inflation is," said Chris Gaffney, president of St. Louis-based EverBank's world markets division. Among other precious metals, silver was down 0.7 percent at $17.11 an ounce, having hit a 1-1/2-month high of $17.29 on Friday. Platinum was 0.2 percent at $971.40 an ounce after touching a more than 3-1/2-month peak at $973.60 and palladium was 0.9 percent higher at $1,099.60, off last week's record high of $1,105.70.