Gold softened on Monday, losing some of its safe-haven appeal after a European banks stress test showed no nasty surprises, but physical buying offered support as levels below $1,200 an ounce attracted bargain hunters.
Seven out of 91 banks failed the test, with investors appearing content with the results and the euro rising against the dollar, despite some concerns that the test had not been rigorous enough.
A small number of banks failed, said Daniel Major, an analyst at RBS Global Banking & Markets. It brings nearby stabilization to risk appetite and that's having a bit of an impact of gold today.
Equities rallied, boosted by robust U.S. company earnings and surprisingly vigorous euro zone economic data.
Spot gold traded at $1,186.95 an ounce by 8:25 a.m. ET from $1,189.05 late on Friday. In the previous session gold briefly crossed $1,200 before falling sharply.
Gold struck a lifetime high at $1,264.90 in early June.
The factors pushing gold haven't gone away, said Robin Bhar, an analyst at Credit Agricole, citing sovereign debt, the outlook for inflation and the devaluation of currencies.
They're just probably not going to be in focus now the stress tests have been done and concerns about the banks and the overall level of debt have been eased for the time being.
Analysts reported that strength in the physical market was helping prices to find a floor.
Platinum earlier rose to its strongest in a month on fund buying driven by gains in equities. Asian shares rose on solid U.S. corporate earnings and strong euro zone data.
Platinum reached as high as $1,552.50 an ounce, its highest since late June, and later traded at $1,539 an ounce versus $1,539.45 on Friday.
Palladium hit a session high of $476 an ounce, its highest since June 28, and later traded at $472.50 an ounce versus $464.55.
Analysts see platinum prices rising as a gradual economic recovery leads to increased demand for the auto catalyst metal, but some of the euphoria that lifted forecasts earlier this year has evaporated after a hefty correction in May, a Reuters poll showed.
U.S. gold futures for August delivery added $1.2 to $1,189 an ounce after settling nearly $8 lower following the European stress tests.
Money managers cut their long, or bullish exposure, to U.S. gold futures by 18 percent for the week to July 20 as the metal's prices hit two-month lows, trade data on Friday showed.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P) said its holdings were unchanged at 1,302.046 tonnes. The holdings hit a record at 1,320.436 tonnes on June 29.
Silver was at $18.05 versus $18.08 on Friday.
Investors will keep an eye on U.S. new home sales data for June, due at 10 a.m. ET.
(Additional reporting by Lewa Pardomuan in Singapore; editing by Alison Birrane and James Jukwey)