Gold futures trimmed losses on Monday, after official data showed that U.S. new home sales fell to a four-month low in July, dampening optimism over the health of the housing sector.

On the Comex division of the New York Mercantile Exchange, gold for December delivery shed 0.12%, or $1.60, to trade at $1,278.60 a troy ounce during U.S. morning hours.

Futures held in a narrow range between $1,276.50 and $1,282.10 an ounce. Prices hit $1,273.40 an ounce last Thursday, the lowest since June 18.

Futures were likely to find support at $1,266.50, the low from June 18 and resistance at $1,299.30, the high from August 20.

The U.S. Commerce Department said new home sales dropped by 2.4% to a seasonally adjusted 412,000 units last month, compared to expectations for an increase of 5.7% to 430,000.

New home sales in June were revised up to 422,000 units from a previously reported 406,000 units.

Meanwhile, market players continued to price in a greater risk of a sooner-than-expected hike in U.S. interest rates.

Speaking at the Federal Reserve's annual meeting of top central bankers and economists in Jackson Hole, Wyoming, on Friday, Fed Chair Janet Yellen said the U.S. economy is recovering and added the labor market is improving as well.

Her comments came after minutes of the Fed’s July meeting showed that some officials believe the strengthening recovery and ongoing improvement in the labor market supports a move towards tightening monetary policy.

The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, hit 82.66, a level not seen since September 6, 2013.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Also on the Comex, silver for December delivery dipped 0.05%, or 0.9 cents, to trade at $19.45 a troy ounce.

Elsewhere in metals trading, copper for December delivery inched up 0.2%, or 0.6 cents, to trade at $3.230 a pound.

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