Gold held near $1,350 an ounce on Monday after the metal's first weekly rise this year supported investor confidence in the metal, though a more optimistic view of the global economic outlook is continuing to weigh on prices.
A run of above-consensus economic U.S. data this year has lifted demand for higher-risk, higher-yielding assets at gold's expense, leading to a 5 percent dip in prices in 2011 so far.
Spot gold was bid at $1,347.95 an ounce at 1315 GMT, against $1,346.90 late in New York on Friday. U.S. gold futures for April delivery were flat at $1,349.00.
The metal fluctuated on Friday following mixed U.S. payrolls data, but still posted its first weekly rise of the year so far after the European Central Bank and Federal Reserve distanced themselves from speculation monetary policy might tighten soon.
At least the January downtrend is now broken and there was some interest on the lows, said VTB Capital analyst Andrey Kryuchenkov.
The euro hit a two-week low on Monday after a bigger than expected fall in German industrial orders. Usually the consequent strength in the dollar would pressure gold, but the customary relationship between the two assets has weakened.
Stock markets were well-supported, with world stocks hovering near 29-month highs as hopes that the global economic recovery may be gaining traction grew. European shares neared a two-and-a-half year high.
Other commodities were also firm on Monday, with Brent crude jumping back over $100 a barrel and U.S. crude futures climbing, while industrial metals were higher.
Gold prices were supported by a slight rise in physical demand from Asia as buyers in Singapore and Hong Kong returned to the market after last week's New Year celebrations, although China, the world's second biggest gold consumer, remains absent.
We are all waiting to see what the Chinese will do after their New Year holidays, said Afshin Nabavi, head of metals trading at MKS Finance. I would say the physical demand we saw all through January, we have not seen since 2008.
ETF INVESTMENT REMAINS LACKLUSTRE
Investment demand for gold-backed exchange-traded funds was soft, with holdings of the largest, New York's SPDR Gold Trust, dipping by 0.4 tons on Friday.
The weekly Commitments of Traders report from the Commodity Futures Trading Commission showed the Comex gold book declined by just 183,000 ounces, according to UBS, as short covering became nearly as prevalent as long liquidation.
The potential for short squeezes is one factor that is improving our short-term outlook for gold, UBS said. So too is the resumption of physical demand from China later this week, although not at the furious pace set in January.
There is little doubt that sentiment toward the yellow metal is significantly less negative than the case at January end, although it's not yet in outright positive territory.
On the supply side of the market, South Africa's Harmony Gold, the world's fifth-largest listed gold miner, more than doubled its earnings in the last quarter of 2010, and said it was set to meet long-term production targets.
West African-focused gold producer Randgold Resources said full-year profit jumped 43 percent as higher gold prices outweighed a fall in production, and that its output is set to rise to 750,000-790,000 ounces in 2011.
Silver was at $29.19 an ounce against $29.08. Platinum
was at $1,838.75 an ounce against $1,842, and palladium at $812.53 against $811.50.
The chief executive of Anglo Platinum, the world's top platinum producer, said on Monday he expected platinum prices to average at least $1,800 per ounce in 2011. He said he expects the market to remain in balance.