Spot gold edged lower by 0.2 percent to $1246.84 (R16 705.80) per ounce at 9.30am in New York, while US gold futures slipped 0.2 percent to $1248.9.
The dollar index strengthened 0.15 percent against a basket of major currencies, pulling away from four-month lows plumbed last week.
“Gold is stuck between $1238 to $1260 with the risk to skewed to downside based on rising expected interest rates and failure to break higher which has left it vulnerable to profit-taking in the short term,” said Ole Hansen, the head of commodity strategy at Saxo Bank.
A Federal Reserve official said on Friday that the Fed could pause interest rate hikes when it begins shedding its bond holdings, a move that could benefit gold. Gold is highly exposed to interest rates as they lift the opportunity cost of holding non-yielding bullion.
Jump in inflation
US consumer spending barely rose in February amid delays in the payment of income tax refunds, but the biggest annual jump in inflation in nearly five years supported expectations of further interest rate hikes this year.
Spot gold notched a quarterly gain of about 8.4percent on Friday, marking its best quarter in a year, mostly driven by uncertainties around US President Donald Trump’s policies and elections in Europe.
Hedge funds and money managers raised their net long position in Comex gold for the second straight week in the week to March 28, and boosted it slightly in silver, US Commodity Futures Trading Commission data showed on Friday.
The main focus for markets this week is on US payroll figures on Friday and Trump’s first meeting with counterpart Xi Jinping on Thursday and Friday.
In other precious metals, spot silver edged down 0.1percent to $18.20 per ounce. Platinum rose 0.7 percent to $952.30.