Gold prices fell 1% on Monday, slumping to a nine-month low as the dollar firmed and U.S. Treasury yields remained elevated, eroding bullion's appeal.
Spot gold dropped 0.6% to $1,691.40 per ounce by 1335 GMT, after hitting its lowest since June 8 at $1,683.68 earlier in the session. U.S. gold futures declined 0.3% to $1,692.60.
The dollar climbed to a more than three-month peak, while U.S. 10-year Treasury yields held close to an over one-year high, increasing the opportunity cost of holding gold, which pays no interest.
While gold is being kept in check by the high yields and the dollar, Commerzbank analyst Daniel Briesemann said: "We see gold behaving like a tsunami, the water is going away at the moment due to severe pressure, but prices will come back with even more strength once these factors are gone."
Helping gold recoup some of its losses earlier during the Asian session, the U.S. Senate passed President Joe Biden's $1.9 trillion COVID-19 relief plan.
DailyFX strategist Margaret Yang said inflation was definitely going to go up because of rising oil and base metal prices, and some of the individual U.S. stimulus money may also go into investments such as gold exchange-traded funds to hedge against future inflation.
Gold also saw some support earlier in the day, following an attack on Saudi Arabia's oil industry on Sunday.
While gold is considered a hedge against inflation likely stemming from widespread stimulus, higher bond yields this year have threatened that status because they translate into a higher opportunity cost of holding bullion.
Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust GLD , fell to a 10-month low on Friday.
Silver fell 0.2% to $25.13 an ounce. Palladium dropped 0.7% to $2,322.36, while platinumrose 0.1% to $1,130.82.
(Reporting by Shreyansi Singh and Sumita Layek in Bengaluru. Editing by Mark Potter and David Evans) ((Shreyansi.Singh@thomsonreuters.com; +91 8061823666/3590 (If within U.S. call +1 646 223 8780); Reuters Messaging: Shreyansi.Singh@thomsonreuters.com))