(REUTERS) -- Gold prices rose above $1,680 an ounce on Monday as the dollar steadied off earlier one-month highs against the euro, with the U.S. unit further paring gains after U.S. construction spending and manufacturing data.
Spot gold was up 0.8 percent at $1,681.00 an ounce at 1433 GMT, while U.S. gold futures for April delivery were up $10.70 an ounce at $1,682.60.
The precious metal is building on a 6.6 percent rise in the first quarter after Federal Reserve comments reassured investors that U.S. interest rates would remain low for an extended period, keeping the opportunity cost of holding gold low.
Better news on the U.S. economy, an improvement in which could reduce the prospects of a fresh round of quantitative easing and raise the prospect of an eventual rise in interest rates, has clouded the picture for gold.
The wider macro environment is generally improving ... so I think that's creating some headwinds, and also the European banking crisis settled down, so there's less need for safe haven of gold at this point, Standard Chartered analyst Daniel Smith said.
But we think that the downside is actually quite limited from here, he added. We think that actually gold will tend to rally in the months ahead on the back of a wider improvement in liquidity which we're seeing across the macrospace.
Data released on Monday showed the pace of growth in the U.S. manufacturing sector picked up a tad in March, although U.S. construction spending in February recorded its largest drop in seven months.
The dollar index surrendered earlier gains in the wake of the numbers, helping gold to rise. Dollar weakness makes assets priced in the U.S. unit cheaper for other currency holders.
U.S. and European stock markets rose on Monday, meanwhile, although oil prices slipped.
MONEY MANAGERS LIFT BULLISH BETS
U.S. Commodity Futures Trading Commission figures showed on Friday that money managers, including hedge funds and other large speculators, raised their bullish bets in gold for the first time in four weeks last week.
Speculators in silver also cut their bullish exposure, reducing their net length by 3,284 lots to 17,031 contracts - their lowest level since the week of January 29, when they were long on 16,034 lots.
Jewelers in major gold consumer India remained on strike on Monday for a 17th day after the finance minister proposed to double the import duty on gold, an excise duty on unbranded jewelry and a tax on transactions worth more than 200,000 rupees.
A recent pull-back in Indian gold demand has forced prices lower over recent weeks, following the Indian government's decision to double the duty payable on gold imports to 4 per cent and to impose an additional 0.3 per cent tax on most gold jewelry, National Australia Bank said in a note.
Spot silver was up 2.4 percent at $32.97 an ounce. The grey metal broke a three-quarter losing streak in the first three months of 2012, rising 16 percent on gold's coat-tails.
Spot platinum was up 0.2 percent at $1,647.49 an ounce, while spot palladium was up 2 percent at $661.25 an ounce.
U.S. auto sales are expected to continue at a strong pace in March, capping the best quarter in four years for new vehicle purchases as the overall U.S. economy improved and new car buyers found easier financing.
Automakers are the biggest consumers of platinum and palladium, which are widely used in autocatalysts.