Gold prices dropped on Monday in Asian trading, with traders selling gold in favor of riskier assets more heavily offsetting any optimism over a possible slowdown in the Federal Reserve's rate hikes.

As the dollar and Treasury yields dropped sharply last week in response to the US nonfarm payrolls report that was lower than anticipated and the Fed's less aggressive comments, gold enjoyed some support.

Spot gold slipped by 0.5% to $1,984.24 per ounce, meanwhile gold futures dipped by 0.4% to $1,991.15 per ounce.

Through October, significant gains in gold had been driven by worries about the conflict. However, traders locked in their profits on the yellow metal as it now seemed improbable that the war would spread to other parts of the Middle East.

However, traders mostly shifted their investments into riskier assets like equities and currencies, so any significant increase in gold was constrained. A diminishing risk premium on the Israel-Hamas war further undermined demand for the yellow metal as a safe haven, even as the fighting showed no indications of abating.

Currently, traders are factoring in a 95.2% probability that the Fed won't raise interest rates any further. Additionally, rate reductions by the central bank are anticipated to start as early as June 2024.