Gold pared most of its daily gains on Monday but still finished modestly higher. February gold moved to $875.30, up $4.10 for the session. Earlier, the precious metal hit a 2 1/2 month high of $892 as violence in the Middle East led traders to the safety option.
The precious metal gave back gains as the dollar turned higher versus the euro and other major currencies. Gold usually moves opposite the dollar because of its hedge appeal.
Crude oil closed a choppy session above $40, helping gold's hedge appeal. Light sweet crude finished at $40.02, up $2.31 for the day. Prices hit as high as $42.20 amid concerns violence in the Middle East could disrupt supplies.
Israel continued its attacks on the Hamas-controlled Palestinian territory of Gaza for the third consecutive day, as Israeli warplanes bombed the Islamic University in the Gaza Strip and government offices in the early hours Monday.
There was no major economic news on Monday in the U.S. On Tuesday, consumer confidence figures will be released. Also, a key regional manufacturing survey is scheduled to be revealed. The factory sector will remain in focus at the end of the week, when a key report on national manufacturing performance is expected.
Gold rose $21.60 to $869.60 an ounce on Friday, and is up about 6 percent so far this month.