Gold rose half a per cent on Monday on a weaker US dollar and light Chinese buying, but rising stock markets could curb gains.
Gold fell 3.5% in April as signs of economic recovery boosted risk appetite and dented safe-haven demand.
Gold hit a near four-week high of $US918.25 last Monday but failed to sustain the gains as investors shifted some of their money to shares.
Spot gold was quoted at $US891.00 an ounce, up $US5.20 from New York's notional close. Gold has fallen 11% since spiking to an 11-month high above $US1000 in February on profit taking, lower oil prices and gains in stocks markets.
"I think it's certainly consolidating. I am not convinced we won't see those highs again yet and possibly go higher," said Darren Heathcote of Investec Australia in Sydney.
"We are heading towards the wedding season, so we are getting a bit of support coming in on the downside as we dip. I think the dollar's probably the major driver at the moment," he said.
Gold buying has picked up in India during the wedding season, when jewellery is the most common gift during religious events and forms an essential part of the dowry basket.
Trading was thin, with Japanese markets closed for Golden Week holidays until Wednesday. Britain's markets are also closed on Monday for May Bank Day holiday.
The euro inched up to $US1.3290 from $US1.3264 on Friday after better economic data worldwide spurred hopes the worst in the global economy may be past.
Gold typically moves in an opposite direction to the US dollar, which is often bought as an alternative to the US currency. But the dollar and gold have recently tracked each other, reacting to risk aversion.
Hong Kong shares extended gains to rise more than 4% on Monday, sending the main index to its highest level since mid-October 2008, with investors cheered by signs of recovery in China and stabilisation in the US economy.
"Stocks are pretty good, so I don't think gold can move up much higher. There may be some resistance at $US894," said a dealer in Hong Kong, a referring to a high seen in late April.
"We've seen light demand from physical buyers in mainland China, but it's such a thin market because of the absence of the Japanese," he said.
