By Eric Onstad
Spot gold was down 0.2 percent at $1,211.16 an ounce by 0941 GMT after climbing as high as $1217.85 in early trade.
U.S. gold futures dipped 0.3 percent at $1,219.50 an ounce.
"Overall the bears remain in control and they continue to increase their short positions - both the net and gross are hitting records," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Hedge funds and money managers added a hefty 13,931 contracts to their net short position in the week to July 31, bringing it to 41,087 contracts, the biggest since records became publicly available in 2006, data showed on Friday.
Gold has been in a downtrend since touching a peak of $1,365.23 on April 11. It has shed over 11 percent and hit a 17-month low on Friday.
"We bounced off the $1,205 level on Friday and that is just a red flag to the bears right now. They are taking aim at that level and gold is likely to struggle unless we see a clear change in the view on the dollar," Hansen added.
The dollar rose on Monday, edging towards a one-year high, as escalating trade war rhetoric between the United States and its trading partners helped the U.S. currency.
Investors have largely been buying the dollar as a safe haven asset rather than gold as the U.S.-China trade dispute escalates.
Chinese state media on Monday lambasted U.S. President Donald Trump's trade policies in an unusually personal attack.
"The more expensive dollar is capping the rally in gold prices. Further downside for gold still appears to be possible especially if the dollar continues to rally," OCBC analyst Barnabas Gan said.
Spot gold may retest a support at $1,206 per ounce, a break below which could cause a loss to the next support at $1,194, Reuters technical analyst Wang Tao said.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.26 percent to 794.90 tonnes on Friday.
In other precious metals, silver fell 0.1 percent to $15.36 an ounce, platinum rose 0.5 percent to $830.80 an ounce, while palladium added 0.2 percent to $910.97 an ounce.
(Additional reporting by Apeksha Nair in Bengaluru. Editing by Jane Merriman)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)