Gold slipped to its lowest level in over two weeks on Monday as the dollar and equities rallied, while prospects of monetary policy tightening in the United States ahead of a Federal Reserve meeting also weighed on the metal.

Spot gold was down 0.3 per cent at $1,315.36 an ounce by 0658 GMT. Earlier in the session, gold hit $1314.36, its lowest since August 31. US gold futures for December delivery fell 0.5 per cent to $1,319 an ounce.

“Further risk-taking appetite left gold prices in the dust," said OCBC analyst Barnabas Gan.

Balance sheet reduction

Asian shares hit a decade high on Monday and the dollar hovered around an eight-week peak against the yen, in the start to a week in which the Fed is likely to announce balance sheet tapering.

The two-day Fed Open Market Committee meeting, which begins on Tuesday, will be closely watched by markets as the US central bank is expected to announce its balance sheet reduction plans while keeping interest rates unchanged in an effort to "normalise” monetary policy.

“Gold prices also came under some selling pressure, with investors dismissing geopolitical risks and instead focusing on the possibility of rate hikes from central banks,” ANZ analyst Daniel Hynes said in a note.

Fed rate hike

Fed funds futures on Friday implied traders saw a 53 per cent chance of a December rate hike, according to CME Group's FedWatch tool.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which the metal is priced.

Geopolitical tensions

Investors largely brushed aside concerns on the geopolitical front after a relatively quiet weekend in the Korean peninsula.

US Ambassador to the United Nations Nikki Haley had said on Sunday the UN Security Council has run out of options on containing North Korea's nuclear programme and the U.S. may have to turn the matter over to the Pentagon.

Trump addressing world leaders

North Korea issues will likely take centre stage when Trump addresses world leaders at the United Nations for the first time on Tuesday.

Spot gold may drop to $1,309 per ounce, as it has broken a support at $1,321, said Reuters technical analyst Wang Tao.

Meanwhile, data showed speculators raised their net long position in COMEX gold contracts for the ninth straight week, bringing it to a one-year high in the week to September 12.

In other precious metals, silver slipped 0.4 per cent to $17.51 an ounce, after earlier hitting its lowest since September 1. Platinum rose 0.4 per cent to $967.90 an ounce, while palladium gained just over 1 per cent to $933.40.

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