Gold prices fell 1.4 percent Monday as the bankruptcy of a broker-dealer heavily invested in European sovereign debt drove investors to the safety of the dollar.

New York-based MF Global Holdings had spent about $6.3 billion on European government bonds from Italy, Spain and Portugal, among others. As the value of those investments collapsed, so did MF Global Holdings.

The bankruptcy underscored the spreading effect of Europe's sovereign debt crisis.

Investors abandoned stocks on both sides of the Atlantic, chopping all major European equity indexes by more than two percent. In the U.S., the Dow Jones Industrial Average was down 1.2 percent, the Nasdaq Composite fell 0.92 percent, and the S&P 500 gave up 1.2 percent.

The dollar soared 1.3 percent against a basket of major currencies.

The greenback also benefited from a report by the Organization of Economic Development and Cooperation that predicted two more years of weak growth, high unemployment -- or worse if Europe fails to resolve its sovereign debt and banking crisis.

Gold found some support from a net increase of 1.5 million ounces in non-commercial speculative long gold positions, a 16.04 metric ton increase last week in the holdings of the world's largest exchange-traded fund, SPDR Gold Trust, and easing concerns about Japan's currency intervention.

Some of the potentially negative currency impact on gold prices was mitigated because the Bank of Japan intervention wasn't expected to be an ongoing event, CME said in a note.

Gold for December delivery was off $21.70 to $1,725.20, while gold for immediate delivery fell $22.96 to $1,720.78.

Silver for December delivery was off 93 cents to $34.09, while silver for immediate delivery gave up $1.02 to $34.38.