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Gold edges lower on euro, Fed uncertainty may help

AP

Gold edged lower as the euro eased on Monday but a possible delay in the U.S. Federal Reserve's decision to taper off its bond-buying program could boost the metal's safe-haven appeal.

Bullion, which has benefited from central bank liquidity, reversed heavy losses last week and gained nearly 2 percent on weaker-than-expected U.S. nonfarm payrolls.

(Read more: Why bad news for workers is great news for gold)

Gold fell 0.2 percent to $1,388.09 an ounce by 0352 GMT. It slipped to $1,362.55 on Friday, its weakest since August 22, before rallying after data showed U.S. employers hired fewer workers than expected in August.

"Even as recently as last week, we heard diverging views on the tapering schedule from Fed governors themselves, making it hard to know what the central bank will ultimately decide to do," said Edward Meir, an analyst at INTL FC Stone.

"This confusion will likely prevent gold from weakening substantially over the course of this week, but we suspect that the selling should intensify after the Fed meeting is out of the way and assuming we do indeed get a modest amount of tapering."

The disappointing U.S. jobs report, which initially weighed on the dollar, raised speculation the Fed may minimize the size of a likely reduction in stimulus many investors expect later this month. The euro dropped 0.1 percent to $1.3175 on Monday.

The U.S. jobless rate hit a 4-1/2-year low as Americans gave up the search for work, complicating the Fed's decision on whether to scale back its monetary stimulus this month.

U.S. gold was up $2.30 an ounce to $1,388.80.

(Read more: Top technician is sure that gold's going to $1,200)

"We still see that gold should probably test $1,400," said Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore. "We are still seeing some demand. There are more inquiries from India for both gold and silver."

Jewelers in main gold consumer India expect a surge in imports this week after the government clarified overseas buying rules. Most of the jewelers are sustaining on stocks shipped from April to May, which totaled more than 300 tons.

(Read more: India might buy gold from citizens to ease rupee crisis)

Gold is one of the biggest items in a record current account deficit that has helped push the rupee to an all-time low. The government has raised the import duty on gold to an all-time high of 10 percent.