Ahead of the Fed’s two-day policy meeting, which concludes Wednesday, “gold should settle between the $1,850 and $1,900 range,” said Moya. 

“Gold’s outlook is still bullish mainly because of dovish commitments” from Fed Chairman Jerome Powell and Treasury Secretary nominee Janet Yellen, he said. “The next couple of weeks are big for fiscal negotiations and that should be critical for gold’s short-term outlook.” 

February gold GC00, -0.17% GCG21, -0.17% fell $6.50, or nearly 0.4%, to $1,849.70 an ounce, after putting in a weekly gain of 1.4% on Friday.

Silver for March delivery SI00, -0.73% SIH21, -0.73% was down 30.6 cents, or 1.2%, at $25.25 an ounce, following a 2.8% weekly gain.

The move for gold came as “the dollar mounted another rally following a steady stream of negative European news that sent the euro sharply lower,” said Moya. The ICE U.S. Dollar Index DXY, +0.22% added 0.3% to 90.50 in Monday dealings.

Gold traders also awaited data on the health of the U.S. economy, with gross domestic product data due Thursday.

“For certain, the metal is likely to see much higher volatility during this week, and the event that is likely to influence the gold prices the most will be the US GDP number,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily research note.

The gold market also awaits updates on prospects for a proposed $1.9 trillion coronavirus relief package from newly minted U.S. President Joe Biden, as well as further guidance from the Fed on its liquidity programs, which have been underpinning financial markets.

Meanwhile, bonds were catching a bid in Europe and that was spilling over in the U.S. market, with the 10-year Treasury note TMUBMUSD10Y, 1.046% rate at 1.05%. Bond prices rise and yields fall.

Government bonds were responding to signs of COVID fragility in Europe, with growing talk of double-dip recessions in the eurozone amid fears of longer-lasting restrictions to curb the spread of the deadly pathogen.

Falling bond prices can help lift gold prices because the commodity doesn’t offer a coupon.

In other Comex trading, prices for March copper HGH21, -0.54% were down 0.3% at $3.616 a pound. April platinum PLJ21, -1.58% lost 0.6% to $1,104.30 an ounce and March palladium PAH21, -1.30% declined by 1.5% to $2,330.50 an ounce.

“Bottom line for both industrial and precious metals, as long as the longer-term downtrend in the dollar continues, and stimulus-fueled growth and inflation expectations are maintained, then metals should be able to continue their uptrends well into 2021,” said analysts in the latest at Sevens Report Research newsletter.