Gold settled under $1,330 on Monday as confusion over the outlook for U.S. monetary policy dragged on, with weak buying from China overnight adding to the softer tone.
Comments from St Louis Federal Reserve President James Bullard that the Fed could reverse last week's surprise decision to maintain monetary easing at its next meeting helped push gold down 3 percent on Friday, erasing gains made in a volatile week.
Prices have fallen more than 20 percent this year, driven largely by Fed hints that it may begin to rein in its $85 billion monthly bond-buying program before the end of 2013. Uncertainty over the timing of the move has led to choppy trading.
"After last week's move a lot of people are confused on how the market is going and are trying to avoid big positioning ahead of next week's non-farm payrolls," MKS SA head of trading Afshin Nabavi said.
"Unless there is some mega change in the U.S. labor market, I don't think we will have any QE slowdown this year and that should grant some support to gold."
Ultra-loose monetary policy has been a key driver of higher gold prices in recent years, as it keeps up pressure on long-term interest rates, keeping the opportunity cost of holding bullion low, while stoking fears of inflation.
Friday's hawkish comments from Bullard weighed on European shares early on Monday, while a landslide victory in German elections for Angela Merkel supported the euro.
For more information on precious metals, please click here.