On Monday, spot gold retreated from near-record high levels, driven by a stronger U.S. dollar and rising Treasury yields. Market participants reduced their expectations for significant monetary easing by the Federal Reserve.

As U.S. personal consumption expenditures (PCE) inflation data remained stable in July, the need for the Federal Reserve to cut interest rates sharply in September has declined.

The market currently expects the Fed to cut rates by 50 basis points this month with a probability of about 33%, down from 36% a week ago; the probability of cutting rates by 25 basis points is 67%. Nevertheless, the market still expects the Fed to cut rates by 100 basis points by the end of this year.

Investors are waiting for the U.S. nonfarm payrolls report to be released on Friday to gain more insight into macroeconomic conditions. Markets generally expect that all sectors of the U.S. economy, except agriculture, may have added 163,000 jobs in August, up from 114,000 jobs in July.

IG analyst Tony Sycamore said, “If the U.S. economy adds 150,000 jobs or more and the unemployment rate falls to 4.2% or below, it will boost confidence in a soft landing for the economy.”

Market volatility is likely to be low as U.S. markets are closed on Monday for a public holiday.

Spot gold was down 0.21% at $2,498.15 an ounce as of 7:54 GMT on Monday. Gold's all-time high currently stands at $2,531.76 an ounce.

Gold futures for December delivery were up 0.10% at $2,530.05 an ounce.

The U.S. dollar index (DXY), which reflects the relative strength of the greenback against six other major currencies, was almost flat Monday at 101.601. The dollar index held near a two-week high of 101.799.