Speculation that incoming Federal Reserve chief Janet Yellen would maintain the Fed's easy monetary policy helped lift gold late last week after she robustly defended the bank's bold steps to spur economic growth on Thursday.
Ultra-loose monetary policy, which benefits gold by keeping interest rates low while stoking expectations of rising inflation, has been a key driver of higher gold prices in recent years. They have fallen 23 percent this year on speculation it is set to end.
Spot gold was down 0.3 percent at $1,285.45 an ounce at 1007 GMT. The metal climbed more than $20 an ounce in the last three days of last week after hitting a one-month low at $1,260.89 on Tuesday.
U.S. gold futures for December delivery were down $2.40 an ounce at $1,285.00.
"There isn't a lot of fresh money coming in, and Chinese premiums are somewhat disappointing for the time of year. And today everything's in the red, so gold's just following suit," Simon Weeks, head of precious metals at ScotiaMocatta, said. "But overall this is a sideways environment."
"If we do have proof that the green shoots (of U.S. economic recovery) are turning into something more meaningful, clearly it will have a negative impact on gold, but it seems those expectations are being pushed out further again," he said. "Equally, I don't think there's enough negativity coming back in again to push us back into bull mode. So we're just in a sideways corridor."
European stocks were flat on Monday, while benchmark Brent crude oil futures and copper declined by 0.4 percent and 0.2 percent respectively.
The dollar index also fell 0.2 percent.
ASIAN DEMAND WILTS
Gold demand from major consumers in Asia remained lacklustre on Monday. Chinese premiums have fallen to about $5.50 an ounce from about $7.50 on Friday.
Prices are also suffering from a dearth of demand from India, which is set to be overtaken as the world's number one gold buyer this year by China after the Indian authorities hiked export duties for the metal.
"Weakness in the physical demand especially from India is so evident that any positive news for gold still does not move the markets the way it would during the first four months of this year," EmiratesNBD said in a note over the weekend.
"(That) seems to be primarily attributed to the challenges that the Indian market has witnessed in the second half of 2013," it said, adding that some reports have indicated imports in the second half of 2013 could fall to 135 tons from 425 tons a year before.
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, said its bullion holdings resumed their decline last week after posting their first net weekly inflow since late August in the previous week.
Among other precious metals, silver was down 0.5 percent at $20.63 an ounce, while spot platinum was down 0.1 percent at $1,435.50 an ounce and spot palladium was down 0.6 percent at $723.97 an ounce.