Gold futures for April delivery closed down $15.40, or 0.9 percent, at $1,724.90 an ounce. Trade ranged $1,714.00 to $1,740.90.

“The gold sell-off on Friday continued today with no sign of a bounce of significance. Technically Friday's move formed a reversal pattern and this coming at the end of a protracted bull run added to the selling pressure,” London-based broker Triland Metals said in a note.

In addition to building chart pressure, the precious metals complex was dragged down by the deepening eurozone sovereign-debt crisis.

“Gold is reacting to a possible default in Greece, which always worries traders who think there could be some bank selling of gold to raise dollars. Indeed, there has been a lot of lending and leasing recently and the borrowers were selling forwards,” George Gero, a vice president at RBC Wealth Management, said.

Greece must restructure its debt and agree to more stringent austerity measures in order to qualify for an additional 145 billion euros in bailout funds.

This European uneasiness is also being felt in the currency and equity markets with the euro last down about a quarter cent at 1.3134 against the dollar, while the Dow Jones industrial average was off 0.24 percent at 12,831.

In gold specific news, the Comex net speculative length climbed by 106 tonnes to 605 tonnes last week. The sizeable increase was due to the addition of 94.9 tonnes in new longs and the unwinding of 11.7 tonnes in shorts.

“This has been the most aggressive display of confidence in gold we’ve seen in some time," Standard Bank said in a note.

"However, given that these moves were largely as a result of the Fed’s dovish announcement [last week] and that before these moves the futures market remained cautious of gold’s prospects, we still would not be surprised to see a pull-back,” the bank analysts added.

In fundamental news, gold mine supply is expected to increase this year by 3.6-percent to 2,900 tonnes or about 100 tonnes more than in 2011, HBSC said Monday.

“The near-to-medium-term outlook for gold production appears positive. We believe sufficient projects are in the works to boost gold mine output until 2015,” said the report, which added that gold should average $1,850 in 2012.

By: Tom Jennemann / Mon, Feb 06 2012, 21:21 GMT | Fastmarkets