Gold prices rose on Monday, extending the last session's recovery from four days of declines, as investors bet that Friday's better-than-expected jobs data would not be enough to head off another round of monetary easing in the United States.
The metal briefly dipped in the wake of data showing that U.S. employers added more jobs than expected last month but quickly rebounded as traders digested a rise in the jobless rate.
Speculation that the Federal Reserve may have to unleash another round of quantitative easing - essentially, printing money - to boost U.S. growth has firmly underpinned gold prices this year.
Further monetary easing would maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom as well as weighing on the dollar and boosting inflation expectations in the longer run.
"There is still room for easing if it is required, and there is still a perception that it may be required," Mitsui Precious Metals analyst David Jollie said.
"The question of when that is, with the U.S. elections approaching, makes it difficult to be super bullish on gold, but that doesn't alter the fact that (the perception is there)."
Spot gold was up 0.4 percent at $1,608.96 an ounce at 8:02 a.m. EDT (1202 GMT), while U.S. gold futures for December delivery were up $2.70 an ounce at $1,612.00.
Prices have traded within a tight $75 range for the past four weeks, supported by QE expectations but also under pressure from soft physical investment flows, lighter demand in key Asian markets and threats to the euro from the euro zone debt crisis.
The single currency was little changed on Monday, with investors still cautious about how effective European policymakers' latest pledges to resolve the bloc's debt crisis would be.
European equities rose meanwhile to touch fresh four-month highs on Monday, with investors reluctant to push the market too far down in the face of the European Central Bank's pledge to step in and fight the euro zone debt crisis. .EU
"We expect the wider June-July range to remain intact, with some dull trading for gold at the start of this week as players take a breather from Friday's action, focusing on euro zone headlines," VTB Capital said in a note.
SHIPMENTS TO CHINA
Gold shipments from Hong Kong to mainland China, which is challenging India to become the world's biggest gold market, fell 10 percent in June from the previous month to 67,747 kg, the Hong Kong Census and Statistics Department said.
"Although this was down on the previous month's figure, it was well above the year-on-year level," Commerzbank said in a note. "In the first half year, China thus imported 382.79 tons of gold from Hong Kong, following a figure of 64.95 metric tons (71.59 tons) in the same period last year."
"Considering that gold mining production in China itself climbed 7.7 percent to 177 tons in the first six months of the year, according to the China Gold Association, it is clear that there has been a pronounced rise in gold demand in China."
Hedge funds and money managers sharply raised their net long position in U.S. gold and silver futures and options in the week to July 31 as price gains based on speculation of more Fed stimulus prompted speculators to boost bullish bets, data from the Commodity Futures Trading Commission showed on Friday.
Inflows into gold-backed exchange-traded funds also picked up after a soft July, with data from the largest showing its holdings up 3 metric tons so far this month.
Among other precious metals, silver was down 0.2 percent at $27.68 an ounce, while spot platinum was down 0.1 percent at $1,395.74 an ounce and spot palladium was up 1.3 percent at $574.47 an ounce.
Gold maintained its premium over platinum at above $200 an ounce on Monday, a level it surpassed last week for the first time since early January.
Platinum prices are being held down by worries over demand from carmakers, the main consumers of the autocatalyst material.