Spot gold was trading at three-month lows Monday morning, below $1,100/oz on COMEX for the first time since August on a strong US dollar, boosted Friday by strong US jobs data.
Data showed Friday 271,000 new jobs were created in the US in October, whilst the unemployment rate dropped more than expected to 5%.
"The US economy appears to be coping well with the global headwinds, the strength of its domestic economy clearly offsetting the problems faced by the manufacturing sector," said Commerzbank in a note Monday.
As a result, the "door is wide open" for a rate hike by the US Federal Reserve in December, according to the bank, who cite Fed Fund Futures at a 70% probability a rate hike.
Demand for non-yielding assets such as gold are expected to decline as interests rates move up from historical lows.
Whilst dollar-denominated commodities also struggled with the resulting lift in the US dollar, which moved to a new seven-month high against the euro at $1.078 Monday morning.
Gold speculators sharply reduced their net long positions last week, according to the latest Commitment of Traders data released by the US Commodity Futures Trading Commission Monday.
Managed-money net long positions dropped by 41% to 67,207 contracts for the week ending November 3, down from 114,092 the week earlier.
The drop comes after six weeks of gains, as many investors increased long positions as the gold price lifted.
"Net longs are likely to have been reduced even further in the following days," Commerzbank added.