Gold futures settled higher on Monday, with some buyers tempted back to the market after a second week of gains suggested last month's price slide to a more than two-year low has run its course for now.
Trading volume was much lower than usual as London markets were closed due to the Bank Day holiday.
The metal largely ignored comments by European Central Bank President Mario Draghi affirming ECB's readiness to cut interest rates again if the euro zone economy deteriorates further. Last week, the central bank cut rates to a record low.
Outflows from bullion-backed exchange-traded products, which have hit record levels in recent months, continued but appear to have slowed. The world's largest gold-backed ETF, SPDR Gold Trust, reported an outflow of 3.6 tonnes on Friday.
"We continue to believe exchange-traded product outflows remain a key downside risk in the near term,'' said Suki Cooper, precious metals strategist at Barclays Capital.
Cooper said the risk of further losses in bullion held by gold ETPs is likely to decline if gold prices recover to above $1,500 an ounce.
Spot gold was down 0.1 percent to $1,469 an ounce.
U.S. gold futures edged up $3.80 to settle at $1,468, with trading volume at just over 80,000 lots, about 65 percent below its 30-day average, preliminary Reuters data showed.
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Some buyers have been lured back to the gold market after bullion posted a second consecutive week of gains last week, which suggested last month's price slide to the lowest level in more than two years has run its course for now, analysts said.
Bullion held firm and ended flat on Friday after data showed U.S. employment rose more than expected in April, which eased concerns over the U.S. recovery and dampened talk that further monetary easing may be necessary.
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"With the Fed's recent commitment to stand ready to alter the pace of QE, based on employment and inflation expectations, bullion prices are likely to remain highly sensitive to changes in U.S. employment data,'' HSBC said in a note.
Physical Demand Firm, Premium High
Dealers pointed out rising demand from China, the world's second-largest gold consumer, as Shanghai gold futures <0#SHAU:> fetched premiums of more than $10 an ounce to cash gold, making it cheaper to buy the metal from the overseas market.
A surge in physical buying in Asia and other parts of the world lifted gold prices from April's low of $1,321.35 an ounce, leading to a shortage of gold bars, coins and nuggets in Hong Kong, Singapore and Tokyo.