Gold rose on Monday, erasing all of the previous week's losses, as a steadier dollar and the
resilience of a key chart level removed some downward pressure, while the return of Chinese buyers to the market also lent support.
Prices fell for a fourth week to hit a two-month low on Friday, after an upbeat reading of U.S. wage growth and unemployment supported expectations for a U.S. interest rate hike in December, pushing the dollar and Treasury yields higher.
Gold's resilience above its 200-day moving average at $1,253 an ounce provided some reassurance to buyers, however, helping it rebound. Meanwhile, the dollar came off the boil, steadying below a 10-week high, while geopolitical concerns centered on North Korea and Spain supported prices.
Spot gold was up 0.59 percent at $1,282.86 an ounce.
U.S. gold futures for December delivery settled up at $1,285 an ounce.
"For the time being, gold may have bottomed out," ABN Amro analyst Georgette Boele said. "On Friday people were very reluctant to buy dollars, even though there were enough signals to do so ... and the dollar has come under some pressure again, which is being reflected currently in gold."
"The 200-day moving average has proved to be intact still ... so there were some technical elements playing out," she added. "I think we can go back towards $1,300."
Expectations for a Fed rate hike, she added, are still providing some headwinds to gold, which, as a non-yielding asset, tends to suffer as interest rates rise.
China's central bank held off from adding to gold reserves for an 11th straight month in September, data showed on Monday.
China had been a significant official-sector gold buyer in previous years. On the physical markets, Chinese buyers returned after the Golden Week holiday.
"The onshore premium pushed toward $10 on the back of USD/China weakness and continued underlying physical demand kept price action buoyant throughout the afternoon," MKS said in a
note.
"The concern for bullion will be the strengthening U.S. dollar, with the Fed funds futures now pricing in an 80 percent chance of a December interest rate increase," it said.
Speculators cut their net long positions in COMEX gold and silver contracts for the third straight week, in the week to Oct. 3.
In other metals, silver was up 0.66 percent at $16.89 an ounce, while platinum was flat at $913.10 an ounce and palladium was 1.06 percent higher at $929.75.