Gold dropped after the better-than-expected U.S. housing starts data. Housing starts in the U.S. rose 0.2% to 1.206 million annualized rate in July from a 1,204 million pace in June, beating expectations for a decline to 1.190 million. It was the highest level since October 2007.

The increase was driven by an increase in starts of single-family homes.

Housing market benefits from the strengthening of the labour market.

Building permits in the U.S. dropped 16.3% to 1.119 million annualized rate in July from a 1.337 million pace in June. Analysts had expected building permits to decline to 1.232 million units.

These figures added to speculation on that the Fed will start raising its interest rate in September.

Market participants are awaiting the release of the latest Fed's monetary policy minutes on Wednesday.

October futures for gold on the COMEX today increased to 1108.40 dollars per ounce.