Gold rose to its highest in a week on Monday, riding on a recovery in stock markets and a weaker U.S. dollar against the euro before profit taking erased some of its gains. Gold has bounced around 4 percent since tumbling to a one-month low around $801 an ounce last Thursday, when softer equities forced investors to cash in to cover losses. Platinum extended gains on bargain hunting, with prices trading over 50 percent below a record peak hit last March. Gold rose as high as $845.55 an ounce, its highest level since January 12, before slipping to $839.80 an ounce by 0635 GMT (1: 35 a.m. EST), down $2.05 from New York's notional close, as oil prices reversed course and slipped. "If it drops below $820 again, I think you will see a little buying," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, referring to a level last seen in mid-December. "There's a little bit of selling in Asia." But dealers said record bullion holdings in SPDR Gold Shares boosted sentiment. Gold holdings in the world's largest gold exchange-traded fund jumped another 5 tonnes to 795.25 tonnes last week. "The intact popularity of the metal with investors should be adequate to help stabilize the price at or at least just under the $800 mark," precious metals group Heraeus said in a report, referring to a level last seen in November. In other markets, the Nikkei .N225 ended up 0.32 percent, while the euro firmed to $1.3346 after a rally in stocks in Europe and the United States revived investor optimism and some risk appetite. But oil edged lower to around $36 a barrel, having risen 3 percent in the previous session, which in theory reduced gold's safe-haven appeal. "I guess the gold price has gone up too fast, so that's why we see some profit taking. I would say people are squaring off positions before Obama is sworn in," said a dealer in Hong Kong. "I mean there's still a possibility the dollar may get stronger again." The incoming U.S. administration and Britain on Sunday planned urgent and more forceful moves to reopen the world's clogged credit markets, and President-elect Barack Obama is preparing a "strong message" for banks after he takes over the U.S. presidency this week. Platinum was trading at $968.50 an ounce, up $22.00 from New York's notional close on Friday. More than 60 percent of platinum use goes to autocatalysts to clean exhaust fumes. Bargain hunting from Japanese investors and buying by jewelers ahead of the Lunar New Year celebration next week helped support platinum prices in recent weeks, but uncertainties lingered, said analysts. More bad news for automakers emerged on Friday as manufacturers in Japan, Europe and the United States all warned their businesses continue to struggle and outlooks remained uncertain. "Given this negative dynamic, support for platinum metals prices from its most important demand sector is foreseeable going to be missing this year," said Heraeus in a report.

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