Gold rose on Monday with oil prices, but the dollar's slight rally against the euro sapped momentum and capped gains below the $800 mark.
Liquidity in Europe was thinner as several traders and analysts were attending the annual London Bullion Market Association conference in Mumbai.
Some analysts also cited risk aversion across other financial markets as a factor making some investors reluctant to take major bets one way or another.
Spot gold firmed to $789.00/789.70 per troy ounce by 6:45 a.m. EST, compared with $784.80/$785.50 quoted in late New York on Friday, having hit an intraday high of $793.90 earlier.
The dollar is not playing the game today and this is the reason why gold is not quite moving to $800 or higher, Commerzbank commodities analyst Eugen Weinberg said.
Crude oil prices climbed towards $95 a barrel, last trading up 71 cents at $94.55. But the dollar edged up versus the euro, making gold more expensive for non-U.S. investors.
Prices were still more than 6 percent shy of a 28-year high hit early this month at $845.40. That peak was just below a record high set in January 1980 at $850.
Some analysts said turmoil in financial markets caused by problems in the credit sector could have a negative impact on gold, which is sometimes bundled in with other commodities as an investment to be sold when investors trim exposure to risk.
In light of the ongoing concerns about the woes of the financial system we expect further de-leveraging to hit precious metals over the next couple of weeks, UBS said in a note to clients.
Commerzbank's Weinburg said however that bullion still had potential for more attempts at the highs and beyond, citing a poor prognosis for the dollar and prospects for U.S. lower interest rates boosting gold's safe-haven role.
I think $850 will pretty much be the level by the year-end -- I still see some upside potential. In an environment with low or negative real interest rates, gold performs pretty well, he said.
In other bullion markets, the most active gold futures contract for October 2008 delivery on the Tokyo Commodity Exchange finished at 2,829 yen a gram, up 0.1 percent, from Friday, while the December COMEX gold futures contract was up $2.40 at $789.50.
In mining, 27 gold miners were rescued unharmed in Australia after being trapped underground for five hours by a rock-fall at the 140-year-old Ballarat gold mine, being redeveloped by new owner Lihir Gold Ltd.
Platinum prices gain after Anglo Platinum, the world's biggest producer, cut this year's output forecast on Friday to between 2.45 and 2.5 million ounces of refined platinum.
Spot platinum rose to $1,453/1,458 an ounce, from $1,446/1,451 late in New York on Friday. Silver prices firmed with gold to $14.53/14.58 an ounce, from $14.44/14.49 previously.
Palladium dipped to $362/366 from $365/368.