Gold prices fell sharply, while retreating from three-week highs reached earlier, that was due to the weakening of the U.S. currency.

It is worth noting that the markets continue to monitor developments in Iraq, where militants linked to al-Qaeda, threatened to seize Baghdad after the capture key cities in other parts of the country over the weekend.

Investors were also cautious in anticipation of the outcome of the upcoming policy meeting of the Federal Reserve System, scheduled for Wednesday, searching for fresh hints as possible increase in interest rates.

On the dynamics of trade also affected U.S. data. The survey revealed that the Fed-New York manufacturing index in the region rose slightly in June compared with the previous month. According to the data, the manufacturing index in June rose to 19.3 against 19.0 in May. Note that the previous value has not been revised. Economists had forecast a drop in the index to the level of 15.2 points.

Meanwhile, another report showed: industrial production rose a seasonally adjusted 0.6% from April. Capacity utilization rate, closely watched gauge of efficiency in the economy, increased by 0.2 percentage points to 79.1% in May. Economists had expected industrial production to rise by 0.6% in May and capacity utilization will rise to 78.9%.

Increased production in the last month replaced drop by 0.3% in April compared with the previous month - a smaller drop than originally voiced reduction of 0.6%.

Growth in May, reflecting an increase of 0.6% in the production of the manufacturer and an increase of 1.3% in the mining sector, which was partially offset by a decrease in production in the municipal sector by 0.8%. Total industrial production in May rose 4.3% compared with a year earlier.

The cost of the August gold futures on the COMEX today dropped to $ 1275.8 per ounce.