Gold settled modestly lower on Monday, as the dollar and equity markets fell further following mixed U.S. data, drawing investors to the asset while robust Asian demand also lent support.
Spot gold rose to a three-week peak of $1,248.30 an ounce after a private index of U.S. services industries' activities unexpectedly fell in December, signalling a slowing in overall economic growth at year-end.
But selling picked up rapidly and prices then turned negative before regaining ground again, with traders saying that there may have been a short-lived attempt to re-build short positions after the past few sessions' gains.
Prices were last up 0.3 percent to $1,240 an ounce. U.S. gold futures for February delivery settled 6 cents lower at $1,238.00 an ounce.
Unusually heavy trade volumes rattled U.S. gold futures earlier on Monday, triggering a brief halt while temporarily sending bullion prices down over $30 an ounce, or about 3 percent between 10:14 a.m. and 10:15 a.m. EST.
(Read more: Sudden gold plunge has traders looking for answers)
It was not immediately clear what sparked the volatility, which prompted gold traders to speculate the move was a result of a so-called fat-finger erroneous trade.
CME Group said "all trades stand and our technology performed as designed.'' Frank McGhee, head precious metals dealer at Chicago commodities brokerage Alliance Financial LLC, said some gold traders stood ready to sell after the unusual slide dented buying sentiment.
Analysts remained cautious on gold's current prospects and some said it might retreat during a week filled with events and data releases, after a two-week holiday break.