Gold firmed on Monday as markets reassessed the outlook for the U.S. economy after Donald Trump is inaugurated as President later this month, with the dollar steadying after the previous session's bounce.
The metal, which posted its biggest weekly increase in two months last week, lost some ground on Friday after a U.S. payrolls report supported the view that the Federal Reserve will raise interest rates this year, boosting the dollar.
However, gold found good support around $1,170 an ounce, the 23.6 percent retracement of its November to December decline. Spot gold was up 0.93 percent at $1,183.61 an ounce, while U.S. gold futures for February delivery settled $11.50 higher at $1,184.90.
The metal slid more than 12 percent in the last quarter as Trump's election victory boosted expectations that his tax and spending policies would boost the dollar and inflation, prompting more U.S. rate increases.
"There is an element of people taking a step back from expectations that were formed shortly after the U.S. elections. It looks like the dollar upside has been contained," UBS analyst Joni Teves said.
"A lot is already priced into the dollar, and the same is true for gold. People are now paring back those expectations until we get strong evidence of an acceleration in U.S. growth, or further guidance from the new administration on what their plans are, and whether they will be able to deliver anything close to what people had been pricing in."
Strong outflows from gold-backed exchange-traded funds have lessened of late, while seasonal buying in the big Asian gold markets, where India is deep into wedding season and China is approaching the Lunar New Year, has been strong.
Hedge funds and money managers cut their bullish positions in COMEX gold contracts for the eighth straight week in the week to Jan. 3, taking their holdings to the smallest in 11 months, data showed on Friday. Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
"The December FOMC minutes released on Wednesday emphasised that the Fed is also uncertain about the direction of fiscal policy after Trump's win," Capital Economics said in a note. "We still expect the central bank to hike interest rates four times this year in response to some of Trump's more inflationary policies."
Silver was up 0.89 percent at $16.63 an ounce, while platinum was 0.71 percent higher at $973.75. Palladium was up 0.2 percent at $757.95, having touched a five-week high at $768.10. It rallied more than 11 percent last week.