Gold fell on Monday as investors favored riskier assets after the United States and Canada salvaged NAFTA as a trilateral trade pact with Mexico, while expectations that a strong US economy would lead to higher borrowing costs also influenced sentiment. Spot gold was down 0.3 percent at $1,187.98 per ounce by 1:58 p.m. EDT (1758 GMT), after hitting a six-week low of $1,180.34 in the previous session. US gold futures for December delivery settled down $4.5, or 0.4 percent, at $1,191.70 per ounce.
"The Canada-US trade agreement has taken some pressure off equity markets. So the initial reaction was capital moving out of commodities into the equities space," Kitco Metals' Global Trading Director Peter Hug said. Gold has seen six consecutive months of losses, its longest monthly losing streak since January 1997, largely due to dollar strength stemming from a buoyant US economy and fears of a global trade war.
Investors have also opted to buy the dollar and US Treasury bonds as safe investments instead of gold.
Optimism about a reconstituted free trade agreement for the United States, Canada and Mexico helped world markets kick off the fourth quarter on a positive note. Federal Reserve Chairman Jerome Powell last week indicated gradual increases in the cost of borrowing.
This could further boost the US currency, making dollar-priced gold more expensive for holders of other currencies, potentially subduing demand.
"The main news in gold is still related to the Fed. Following Powell's speech, the market is expecting one more rate hike in December and another three next year," said ActivTrades' Chief Analyst Carlo Alberto De Casa.
"Since it is quite likely that the set of market dynamics that have recently driven the yellow metal into the ditch are set to remain for the balance of 2018, we expect choppy range-bound trading between $1,215-1,180 per ounce in the near term," TD Securities said in a note.
Negative sentiment in gold has reflected in liquidations in gold exchange traded funds, with holdings of SPDR GOLD, the largest gold based ETF, falling over four million ounces since hitting a peak in late April.
Palladium dropped 1.2 percent to $1,059.95 an ounce after touching an eight-month high of $1,094.60 in the previous session. Silver slipped 1.1 percent to $14.44, while platinum rose 0.9 percent to $819.35.