Gold falls on weak commodities

Gold fell on Monday, retreating from the previous session's nearly seven-month high as broadly lower crude oil and grain prices prompted investors to take profits.

Palladium dropped 4 percent for its biggest one-day decline since March on signs of platinum output returning to normal in top producer South Africa, triggering heavy speculative selling.

Traders said volatility could increase ahead of Tuesday's U.S. COMEX gold option expiration, while open interest in U.S. gold futures rose to a one-year high for a third straight session.

Bullion's rally is showing signs of fatigue after five straight weeks of higher prices. Repeated failures to break above key technical resistance above $1,790 an ounce to set a new 2012 high also prompted some investors to lessen their bullish bets.

"There is no question that gold is consolidating its recent gains, but every dip seems to be bought," said Anthony Neglia, president of Tower Trading and COMEX gold options floor trader.

Gold could come under pressure as current prices may be too far away to reach the popular $1,800 call strike at Tuesday's option expiry, and that could prompt some disappointed futures investors to sell, Neglia said.

Original: http://www.cnbc.com/id/49152875