Gold prices edged lower for a second session on Monday as trade tensions between China and the United States helped to boost the dollar and weaken the yuan.
U.S. President Donald Trump said on Friday that he was ready to impose tariffs on virtually all Chinese imports, representing a further $267 billion of goods in addition to the $200 billion already facing potential duties, prompting a threat by China to retaliate.
The rhetoric has pushed investors to the greenback in the belief that the United States has less to lose from a trade war – making dollar-priced gold more expensive for non-U.S. buyers – while puncturing the yuan, currency of the world's biggest gold consumer.
"That gold is below $1,200 an ounce again is mainly to do with the dollar," said ABN AMRO analyst Georgette Boele.
"I expect the uncertainty around the yuan should calm down a bit and that should support prices," she said, predicting that gold would end the year around $1,250.
Spot gold was down 0.1 percent at $1,193.93, slipping towards the 19-month low of $1,159.96 touched last month. U.S. gold futures were 0.1 percent down at $1,199.
Gold has tumbled more than 12 percent from a high of $1,365.23 in April, mirroring a 10 percent fall in the value of the yuan against the dollar.
The dollar has gained broadly against other currencies this year and was boosted again on Friday by strong U.S. jobs data that suggested that the Federal Reserve will continue to raise interest rates. A rate increase is expected this month.
Higher interest rates hurt gold because they increase bond yields, making non-yielding bullion less attractive, and tend to boost the dollar.
Against this backdrop, gold investors are pessimistic.
Hedge funds and money managers have ramped up bets on lower prices, with their net short position in Comex gold the biggest since the data began in 2006.
Meanwhile, holdings of gold-backed exchange-traded funds are down almost 5 million ounces, or 8.6 percent, from a May high.
"We could see a first positive signal only if prices return above $1,200, with space for further recoveries to $1,210 and $1,230," said ActivTrades analyst Carlo Alberto De Casa.
In other precious metals, spot silver was up 0.6 percent at $14.19, platinum rose 0.9 percent to $785.70 and palladium was up 0.3 percent at $983.20.