LONDON: Gold pared gains on Monday as the euro slipped back into negative territory versus the dollar in US holiday-thinned trade, but the precious metal held above $1,570 an ounce as investors bet last week's price drop had been overdone.
Gold is down more than 5 per cent so far in May and is vulnerable to fresh losses in the euro. Lingering concerns over sluggish growth in the euro zone and the health of Spanish banks mean the unit is also on track to fall 5 per cent this month.
Spot gold was at $1,573.16 an ounce at 1405 GMT, little changed from its late Friday level and off a high of $1,583.50. The precious metal fell 1.1 per cent last week.
Afshin Nabavi, head of trading at MKS Finance in Geneva, said some buyers had been tempted back by its dip towards $1,525. "I was among the ones looking for a deeper correction," he said. "But $1,525 now looks to be rather solid."
"It could be a rangebound week, but my guess is that after the US non-farm payrolls data on Friday, gold may very well break above $1,600."
Gold remains firmly tied to the currency markets, climbing earlier in the day after opinion polls ahead of next month's Greek elections showed pro-bailout conservatives in the lead, lifting the euro on hopes Greece may stay in the euro zone.
The news boosted assets seen as higher risk across the board, but European shares later pared gains on fears over the outlook for Spanish banks, while oil prices also came off highs.
The bond markets pointed to ongoing worries over euro zone debt, with the premium investors require to hold Spanish government bonds over their German counterparts hitting its highest since the euro was launched earlier on Monday.
Without the support lent to the market last year by safe-haven demand linked to the euro zone debt crisis, prices will struggle to rise significantly in the near term.
"It feels as though there is plenty of scope later this year for the focus to move from the European fiscal situation to the US fiscal situation. That has the potential to be supportive for gold prices," Natixis analyst Nic Brown said.
