Gold fell more than 1 percent to a two-month low at $1,178.40 an ounce on Monday as sharper appetite for assets seen as higher risk, like equities and industrial commodities, dented the metal's appeal as a haven.
Spot gold was bid at $1,181.05 an ounce at 1353 GMT, against $1,193.10 late in New York on Friday. U.S. gold futures for August delivery fell $7.10 an ounce to $1,181.10.
Gold's 1.5 percent slip last week has undermined confidence in the metal, analysts said, with some shorter-term investors spooked by its failure to hold above $1,200 an ounce.
Liquidation of long positions is weighing on the gold price today, said BNP Paribas analyst Anne-Laure Tremblay. The liquidation is taking gold closer to closely watched technical levels and this has potentially initiated further selling.
Gold's lack of momentum has turned investors away from the metal -- for now, she added. This may well continue for a while unless the (bank) stress tests results prove worrisome.
An improved appetite for assets seen as higher risk, like equities and industrial commodities, has taken some of the wind out of gold's sails in recent weeks.
Wall Street stocks opened higher on Monday, recovering some of the losses they posted on Friday, and tracking gains in European equity markets. Oil prices also rose sharply in early afternoon trade, spiking 2 percent. .N .EU
Some of the risk premium that has gone into gold, primarily from the banking worries we have had, has been all but silenced for now, so that is removing a bit of the support we have had previously, said Saxo Bank analyst Ole Hansen.
Liquidity is pretty poor, so it doesn't take much to move this market, he added.
Gold has struggled to hold its ground since hitting a record $1,264.90 an ounce in late June on concerns over euro zone sovereign debt, which boosted interest in the metal as a hedge against currency volatility.
Holdings of the world's largest gold exchange-traded fund, New York's SPDR Gold Trust, held at 1,314.211 tons on Friday. They have slipped more than 6 tons in July so far, but are still up more than 180 tons since the start of the year.
The euro held firm in afternoon trade, shrugging off early losses made after the Ireland downgrade, as traders awaited results of bank stress tests.
Platinum was at $1,504 an ounce against $1,509, and palladium was at $446 against $446.78.
Aquarius Platinum (AQP.L), the world's fourth-largest primary platinum producer, said it will appeal against a directive introduced by the principal inspector of the North West region of South Africa on bord and pillar mining.
In bord and pillar mining, miners extract material from corridors, or bords, leaving material between the bords as pillars holding up the roof.
The directive stipulates all mechanized bord and pillar mines in the region must reduce the width of the bord to six meters from 10 meters. Aquarius said it does not believe the directive will result in fewer accidents.
As the details become clearer and in turn the production implications, this development has the ability to inject a South African premium into the platinum price, said UBS analyst Edel Tully in a note.
Platinum's reaction so far has been limited in Europe. But it's quite possible that the supply uncertainty alone could well feed into a stronger platinum price as the week progresses.
Silver was at $17.62 an ounce versus $17.79.
(Reporting by Jan Harvey; Editing by Alison Birrane)