Gold held above the key $1,900 ceiling on Monday, despite a drop in prices due to technical selling following a fierce 3% rally in the previous session as the raging Israel-Hamas war sent investors scuttling to the safe-haven bullion.

Spot gold dipped 1.1% to $1,910.70 per ounce by 0748 GMT and U.S. gold futures dropped 0.9% to $1,924.20.

Gold, viewed as a safe investment during uncertain times, eased from its highest since Sept. 20 hit on Friday, when it surged 3.4% in its biggest one-day rise in seven months.

"We saw an extreme move to the upside on Friday and such moves usually beckon some mean reversion," City Index Senior Analyst Matt Simpson said.

"Given the surge in prices, gold will likely remain in focus for traders seeking to buy dips, which makes $1,920 and $1,900 areas of interest. But if tensions in the Middle East continue to escalate, shorting gold may not end too well for bears over the near term."

Earlier this month, speculators turned net short on COMEX gold for the first time since November 2022. They increased their net short positions in the week ended Oct. 10.

Investors are also watching if the conflict ropes in other countries, which has the potential to drive up oil prices further and deal a fresh blow to the world economy.

"If the situation is more isolated than widespread, then some of this haven-demand could unwind," said OCBC Executive Director and FX Strategist Christopher Wong.

Investors have one eye on the Middle-East developments and another on the U.S. monetary policy, with Federal Reserve Chair Jerome Powell's speech due later this week.

Elsewhere, spot silver fell 0.7% to $22.55 per ounce, platinum was down 0.1% to $880.36, while palladium rose 0.2% to $1,150.37.

(Reporting by Swati Verma and Anjana Anil in Bengaluru; Editing by Rashmi Aich, Sherry Jacob-Phillips and Savio D'Souza)