"We opened lower because of the euro. But with the Shanghai opening, prices turned positive," said a precious metals trader in Hong Kong, adding that the gains may not hold when European traders step in. "I would be cautiously long in Asian hours and would be looking to square positions in Europe opening."
Spot gold had risen 0.7 percent to $1,197.30 an ounce by 0727 GMT after dropping as much as 0.5 percent in early Asian hours. Prices on the Shanghai Gold Exchange were about $7 an ounce higher than the global benchmark, an indication of good demand. Premiums were about $4-$5 last week.
Chinese buying has picked up in recent weeks ahead of the Lunar New Year holiday in early 2015, when gold is bought for good fortune and to be given as gifts. Demand is likely to stay strong until the holidays on February 19-20. Traders were also watching the foreign exchange market.