LONDON - Gold fell on Monday after hitting a record high as a stronger dollar prompted some investors to book profits, but strong market sentiment and geopolitical tensions kept prices above the key psychological level of $2,600 per ounce.

Spot gold was down 0.2% at $2,616.57 by 0916 GMT, after hitting an all-time high of $2,631.31 earlier in the session.

The rally was a continuation of the "fear of missing out" momentum that followed last week's bumper U.S. rate cut by the Federal Reserve, said Ole Hansen, head of commodity strategy at Saxo Bank.

"Gold is seeing some long overdue profit-taking this morning with a stronger dollar the trigger," Hansen said.

"The market looks increasingly in need of consolidation, but at this point, a deep one is needed to rattle hedge funds holding the largest bet on higher prices since 2020."

The dollar index, which measures the greenback against six major currencies, was up 0.3%.

Non-yielding gold is up over 27% so far this year, heading for its biggest annual rise in 14 years.

"Investors are closely monitoring the potential for future rate cuts. The key factors going forward will be the pace of Fed rate cuts — specifically, whether another 50 basis point cut will occur this year, and the overall trajectory of this easing cycle," said ANZ commodity strategist Soni Kumari.

Elsewhere, Israeli Defence Minister Yoav Gallant said the public must be calm after the military launched its most widespread wave of air strikes against Iran-backed Hezbollah, targeting Lebanon's south, eastern Bekaa valley and northern region near Syria.

On the technical front, gold is supported by 21-day moving average at $2,537. Its relative strength index at 70 is balancing on the border between "healthy" and "overbought" zone.

Spot silver lost 2.0% to $30.48 per ounce, platinum fell 2.1% to $954.84 and palladium shed 1.9% to $1,047.27.

(Reporting by Polina Devitt in London; additional reporting by Daksh Grover in Bengaluru; Editing by Varun H K)