Gold held steady on Monday below a five-week high, with investors keeping an eye on the dollar, which hovered near record lows against the euro, for short term direction.
But dealers were cautious ahead of Federal Reserve Chairman Ben Bernanke's testimony to the U.S. Congress on Wednesday and Thursday that might influence the dollar.
Gold rose as high as $667.75 an ounce before dipping slightly to $666.90/667.70 by 0958 GMT, against $666.60/667.40 in New York late on Friday.
Prices are likely to continue to take their lead from dollar movements this week as our forex strategists note that with sentiment quite bearish, investors are likely to sell the dollar upon any rallies, said Suki Cooper, precious metals analyst at Barclays Capital.
The weaker dollar could potentially expose gold prices to further upside risk in the near term, however beyond that gold is likely to face downward pressure as demand eases in the seasonally slow months, she said.
The metal rallied to its highest since June 7 at $669.05 last Thursday as the dollar tumbled against the euro, making dollar-priced gold cheaper for holders of other currencies.
The dollar held near record lows against the euro, with investors awaiting inflation data and Congressional testimony by Bernanke for a further steer on the monetary policy outlook.
The U.S. currency has also been weighed down by concerns that troubles in the U.S. subprime mortgage market, which caters to borrowers with a troubled credit history, could spill over into slower economic growth and thus prompt Fed rate cuts.
Indeed, gold has now continued to rise as concerns over the U.S. subprime mortgage market mount, but we have also seen the correlation break down at times recently and, as such, a sudden deterioration in financial markets could well see a sell-off in gold too, said Investec Australia in a daily report.
Gold's future hangs in the balance. It appears that gold's fortunes are now increasingly tied to general investment flows across many financial markets, it said.
In other metals, platinum traded near last week's two-month high of $1,315.90. It was last quoted at $1,311/1,316 an ounce, against $1,310/1,314 in New York.
The market was seen supported by wage negotiations in South Africa, the world's largest platinum producer, and Lonmin Plc cutting its platinum sales forecast.
Lonmin, the world's third-biggest platinum producer, said it now expected sales of between 820,000 and 840,000 ounces of platinum in the year to September 30, compared with its previous forecast of 980,000 to 1 million ounces. The company's shares fell as much as 8.5 percent in early trade.
Silver edged up to $13.04/13.08 an ounce from $13.00/13.05, but off Friday's three-week high of $13.14. Palladium was up $1 at $367/370 an ounce.