Gold rose on Monday as lower prices after the metal's third consecutive weekly loss attracted some buyers back to the market, but a more optimistic view of global growth still limited fresh investment.
A dearth of safe-haven demand in recent weeks as concerns over euro zone sovereign debt and the U.S. economic outlook receded meant gold struggled to make fresh headway after hitting a record $1,430.95 an ounce in December, analysts said.
Spot gold was bid at $1,346.45 an ounce at 1612 GMT, against $1,342.25 late in New York on Friday. U.S. gold futures for February delivery rose $4.80 an ounce to $1,345.80.
The precious metal fell 1.4 percent last week to its lowest since late November as a spate of firmer-than-expected economic data, primarily from the United States, boosted interest in assets seen as higher risk at gold's expense.
Gold exchange-traded funds saw outflows as investors cashed in some of last year's gains. While that trend reversed late last week as prices fell, VTB Capital analyst Andrey Kryuchenkov said the sustainability of this buying is questionable.
(ETF holdings) could stabilize here, but I don't think many more bargain hunters will rush to the market, he said.
Holdings of the largest gold-backed ETF, the SPDR Gold Trust, rose by more than 20 tonnes on Friday. However, they are still down some 9 tonnes this year.
A turnaround in the dollar, which gave up early gains versus the euro, also helped support gold. Weakness in the U.S. unit lifts gold's appeal as an alternative asset and makes dollar priced commodities cheaper for other currency holders.
Concern remained over the stability of the euro zone, however, with political turmoil in Ireland highlighting uncertainties facing the bloc.
Ireland's junior coalition party withdrew from Prime Minister Brian Cowen's government on Sunday, signaling the end of a crisis-riddled administration and hastening an election due on March 11.
SPECULATIVE POSITIONS DROP
Data released on Friday by the Commodity Futures Trading Commission showed a third successive drop in the net speculative position in gold, bringing the net non-commercial long to its lowest since the week of July 26, 2009.
We have got a pretty robust macro backdrop despite some potential for European sovereign issues, said RBS analyst Daniel Major. Our economists aren't in the camp that that is going to derail global growth and the global risk story.
The safe-haven argument, which was the dominant theme last year, is unlikely to be repeated this year, he said. We have already seen slowing interest in exchange-traded funds.
In the near term there seems to be good physical buying in China and India on price weakness and that is providing a bit of support around the $1,350 level, but certainly the Western investment story has started to wane somewhat.
The CFTC data also showed the silver speculative position rose last week by about 1.3 percent, partially offsetting the previous week's fall, while the platinum net non-commercial position staged its largest weekly rise in at least four years.
Platinum was at $1,818 an ounce against $1,824.00, while palladium was at $819 against $819.75. Silver was bid at $27.44 an ounce against $27.47.
Holdings of the world's largest silver ETF, the iShares Silver Trust, fell by 181 tonnes on Friday, their biggest one-day outflow since late November.
They are down by more than 527 tonnes since the beginning of the year, worth some $468 million at today's prices.