Gold settled modestly higher on Monday as the dollar eased, and after a recent sharp unwinding of bullish bets by funds prompted some investors to think the metal was near a bottom.
With a lack of major U.S. economic indicators on Monday, bullion investors focused on Chinese data that showed annual consumer inflation unexpectedly slowed in November, easing market fears of any imminent policy tightening, which is a positive for gold.
Spot gold rose 0.6 percent to $1,236 an ounce. Most Asian share markets rose, energized by a potent cocktail of upbeat Chinese trade data, a weaker yen and a firm finish on Wall Street.
U.S. gold futures for February delivery settled $5.20 higher at $1,234.20 an ounce.
Traders said the U.S. Commodity Futures Trading Commission's Commitments of Traders report last Friday suggested recent heavy selling in gold might have run its course.
The CFTC data showed that hedge funds and money managers cut their bullish bets in gold to their lowest since July 2007, while they raised their bearish bets in gold to near a 7-1/2 year high.
"Gold is paying some attention to the latest CFTC data. We may see short covering into year end, although the reality is that any move higher will be countered by the producer sector selling inventory before the year closes,'' said a TD Securities precious metals trader.
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