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Gold narrowed losses in Asian trade on Monday after earlier falling as much as 1 percent to hit its lowest in more than five months, pressured by a stronger U.S. dollar and expectations the Federal Reserve will raise interest rates in December.

Spot gold was down 0.1 percent at $1,224.68 an ounce by 0728 GMT. The metal fell 1 percent to $1,212.26 an ounce earlier in the session - its lowest since June 3. U.S. gold futures were unchanged at $1,224.00 per ounce.

"What we're seeing today is the continuation of long liquidation going through the market," said Jeffrey Halley, senior market analyst at OANDA. "People seem to have unwound their Trump-risk and are now talking more about 'Trumpflation', with Trump's fiscal policies that he wants to enact with all this infrastructure that would push up inflation and that would push up borrowing rates and yields in the States," Halley said.

The price risk in bullion now may be skewed to the downside into 2017 if U.S. yields continue to back up and the U.S. dollar remains bid under a Trump administration, says Citi Research. The bank concedes that gold’s price decline since the election has gone against what most observers expected in the event of a Trump win. “Perhaps the conciliatory speeches from Mr. Trump, Mrs. Clinton and Mr. Obama played a part in calming investor nerves, but the immediate reaction was not a Brexit-style event for gold either from a spot price or vol perspective for more than a few hours,” Citi says. “The bullish short-term bullion view that Citi outlined on a Trump victory will probably not materialize, especially on a smooth transition of power and given the current strong U.S. dollar trend. The medium-term gold outlook might even be a bit negative for prices on a Trump presidency.” Treasury yields have risen since the Trump win, with the 10-year rising to 2.117% from 1.828% the day before the election.

The forces unleashed by U.S. election results continue to drive the capitals markets, says Brown Brothers Harriman. “The combination of nationalism, reflation and deregulation are seen as good for U.S. equities and the U.S. dollar,” BBH says. “It has not been so kind to U.S. Treasuries, where the 10- and 30-year yield has risen about 32 bp (basis points) this week coming into today's federal holiday that closes the bond market, while the stock market is open. The rising U.S. yields (and) anticipated trade policy has hit emerging markets particularly hard. Many Asian countries are predisposed to manage their currencies, and the downside pressure on them has seen a wave of intervention today, according to reports. Contrary to ideas of ‘race to the bottom’ or ‘currency wars’ where ‘everyone’ wants weaker currencies, a number of Asian central banks are believed to have sold dollars and bought their own currencies to slow the descent.”

Reference: Reuters, KITCO