By Ira Iosebashvili and Ed Ballard 

Gold prices fell Monday, as some investors braced for the Federal Reserve's rhetoric to take a hawkish turn at the conclusion of its monetary policy meeting later this week.

Gold for August delivery settled down 0.3% at $1,319.50 a troy ounce on the Comex division of the New York Mercantile Exchange.

Improving U.S. economic data and easing worries about the negative effects of a U.K. exit from the European Union have convinced some investors that the Fed has more latitude to tighten monetary policy this year. Fed-funds futures, a popular vehicle for traders and investors to bet on the Fed's policy outlook, showed Monday that investors assigned a 20% likelihood to higher rates by the central bank's September meeting, up from 12% earlier this month, according to CME.

The prospect of higher rates tends to weigh on gold, which pays its holders nothing and struggles to compete with yield bearing investments when monetary policy tightens.

"The Fed is definitely in the back of people's minds," said Peter Hug, global trading director at Kitco Metals. "Any scare that the Fed is considering moving in September could cause a selloff."

Hedge funds' appetite for gold futures is also on the wane, in line with a broader pullback across commodities markets.

Data from the Commodity Futures Trading Commission on Friday showed speculators reduced their bullish position in gold, for the second consecutive week, in the week ended July 19, although they retain a sizable net-long position of 252,400 contracts.

Write to Ira Iosebashvili at ira.iosebashvili@wsj.com and Ed Ballard at ed.ballard@wsj.com

(END) Dow Jones Newswires

July 25, 2016 15:04 ET (19:04 GMT)

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