Gold has broken its positive trend and fallen for the first time in four sessions.
Gold futures for February delivery on Monday fell $US10.20, or 0.8 per cent, to settle at $1,203.80 on the Comex in New York amid quiet Christmas holiday trading.
Trading was 49 per cent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
The precious metal is set for its biggest annual loss in three decades, Bloomberg said. It has tumbled 28 per cent this year and is set for the worst annual plunge since 1981.
Some investors lost faith in the metal as a store of value amid a rally in equities and an improving economy, which prompted the Federal Reserve to pare its monthly bond purchases by $US10 billion, to $US85 billion, starting in January.
Many economists expect the Fed will probably reduce its bond purchases in $US10 billion increments over the next seven meetings before ending the program in December 2014, Bloomberg said on Monday.
Holdings in exchange-traded products backed by bullion have dropped 33 per cent this year to the least since 2009, data compiled by Bloomberg show.
"The market is fearing the impact of tapering," Peter Fertig, the owner of Quantitative Commodity Research in Hainburg, Germany, said.
"You have firmer equity markets. There's currently no crisis and nothing that would induce investors to rush into gold."
Silver futures for March delivery on Monday dropped 2.2 per cent, or 43 US cents, to $US19.615 an ounce on the Comex. The metal has lost 35 per cent this year, on course for the biggest annual slump since 1981.
On the New York Mercantile Exchange, palladium futures for March delivery declined 0.2 per cent to $US710.80 an ounce. Platinum futures for April delivery fell 0.8 per cent to $US1,367.20 an ounce.