Gold held broadly steady on Monday just shy of $995 per ounce, consolidating stellar gains last week that took it tantalizingly close to the $1,000 psychological level, with buyers encouraged by dollar weakness.
Investment in palladium continued to jump -- sending prices close to highs for the year -- with fund holdings swelling on expectations depressed auto demand would pick up.
Spot gold stood at $994.70 per ounce by 1348 GMT (9:48 a.m. EDT), broadly steady from $993.40 quoted late in New York last Friday.
The price rose as far as $997.20 last week -- its highest since February, when it briefly topped $1,000.
Gold found support at lower levels but trading ranges were narrow and volumes were said to be thinner, with investors restraining themselves due to Monday's U.S. public holiday.
A confluence of dollar weakness -- making the metal more attractive to non-U.S. investors -- and doubt about the sustainability of global economic recovery prompted a spate of investors to seek refuge in gold last week, as prices hit six-month highs.
Analysts said a run to $1,000 was inevitable.
It will have a go, we are within reach, said Ole Hansen, senior manager at Saxo Bank. Within the first few days of this week we should have an attempt.
MIRROR OF UNCERTAINTY?
Daniel Wills, senior analyst at ETF Securities, told Reuters Television that the higher gold price reflected some uncertainty across markets, as well as dollar weakness.
It also seems to reflect ongoing uncertainty in terms of the likely impact from all the quantitative easing out there, in terms of how that flows through from money supply and into inflation, he added.
The Group of 20 finance ministers and central bankers said over the weekend they would not remove economic stimulus until the global recovery was well entrenched.
While some analysts have argued the case for gold as a hedge against potential inflation when central banks try to navigate away from quantitative easing, others are less convinced -- questioning the sustainability of bullion over $1,000.
I don't buy the argument about inflation concerns, it seems to be far too far-fetched at the moment when we're still looking at a deflationary environment, said David Wilson, director of metals research at SocGen in London.
PALLADIUM INTEREST SURGES
U.S. gold futures for December delivery were at $996.40 per ounce, after settling at $996.70 on Friday.
On currency markets, the dollar and yen lost ground, while the euro rose following the G20 pledge to keep economic supports in place.
In a sign of possible falling investor interest, the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings fell 0.38 tonnes to 1,077.63 tonnes on Friday.
Palladium flows painted a different picture, with the amount of metal ETF Securities holds to back its palladium exchange-traded commodity rising by more than 43,000 ounces or 10.7 percent to a record high on Sep 4.
Analysts said fund flows had been encouraged by speculation that incentive schemes for new car purchases might be extended, helping to revive depressed auto sector demand for the metal.
Spot palladium stood at $289.50 per ounce compared with $290 quoted late in New York on Friday. The market hit 2009 highs last week at $293.50.
In other precious metals, silver was bid at $16.28 an ounce compared with $16.20 on Friday, having earlier hit $16.33, its highest since August 2008. Platinum rose to $1,254 from $1,252.50 on Friday.
South Africa's miners' union said on Monday it would try to persuade strikers at Impala Platinum
(Additional reporting by Miho Yoshikawa in Tokyo and Jane Grieve and Kylie MacLellan in London; Editing by Keiron Henderson)