Gold prices fell on Monday after weaker-than-expected U.S. construction spending and manufacturing data that pushed the dollar index lower but pressured by an agreement that averted a government shutdown.
U.S. Congressional negotiators hammered out a bipartisan agreement on a spending package to keep the federal government funded through Sept. 30, averting a government shutdown and dampening demand for non-interest paying bullion.
Many financial markets in Asia and Europe are closed on Monday for the May Day holiday. Tokyo markets will be closed for three days from Wednesday for a string of holidays known as Golden Week, and many investors take additional time off.
"The current level of the ISM Manufacturing Index is still indicative of healthy growth in the sector, but it will be important to see that level hold," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto.
"Overall, this was a slightly worse outcome than expected and has seen the dollar weaken and yields fall."
"The miss in ISM was enough to push gold higher on the day but I do expect this to be short-lived as traders wait for more direction from the Fed on Wednesday," said Bob Haberkorn, senior market strategist for RJO Futures in Chicago.
The Federal Reserve will meet for a two-day meeting on Tuesday and Wednesday, with a statement scheduled for release at 2 p.m. EDT Wednesday.
U.S. stock markets had trimmed gains after the data, but the Dow Jones Industrial Average had inched higher in the late morning.
"We see gold maintaining a relatively higher trading range in May as tensions with North Korea will command more attention now that the bearish impact of the French election is out of the way," said INTL FCStone analyst Edward Meir.
North Korea suggested on Monday it will continue its nuclear weapons tests.
Money managers increased their net long position in COMEX gold contracts for the sixth straight week to April 25, U.S. government data showed late Friday.
Palladium decreased by 0.97 percent to $815.50. It rose to an over two-year high at $831.50 on Friday.