LONDON: Gold picked up on Monday, touching the psychologically important $1,300-an-ounce level as the dollar and equity markets slipped, although strong U.S. economic data capped gains.
Platinum group metals extended gains after posting their strongest weekly performance in six on supply worries due to strikes at South African mines.
Spot gold rose 0.6 percent to $1,300.40 an ounce by 1011 GMT, recovering after two consecutive sessions of losses, while U.S. gold futures rose 0.5 percent to $1,300.50 an ounce.
The dollar was down 0.1 percent against a basket of currencies and European equities dipped, indicating reduced risk appetite that would support gold.
However, the precious metal looked less attractive compared with U.S. bonds as strong U.S. housing data on Friday has pushed the 10-year U.S. Treasury yield back to 2.5 percent from a six-month low of 2.47 percent.
Returns on U.S. bonds are closely watched by the gold market, given that the metal pays no interest.
Expectations that the European Central Bank will cut interest rates soon to support the euro zone economy, possibly at its policy meeting early next month, are also having an uncertain impact on gold.
"The ECB's loose monetary policy should be bullish for gold but the downside is that it makes the euro weaker, lifting the dollar up so it might not be seen in the dollar gold price," Macquarie analyst Matthew Turner said.
Gold, often seen as a safe-haven investment, has gained 7.5 percent this year on the back of tensions between Russia and the West over Ukraine though it has fallen back recently due to outflows from gold funds and strong economic data.
Holdings of the SPDR Gold Trust, the world's top gold-backed exchange-traded fund, fell 0.26 tonnes to 781.99 tonnes on Friday, in a sign of ebbing investor demand.
Hedge funds and money managers cut their bullish bets on gold futures and options, according to data from the Commodity Futures Trading Commission on Friday.
The European Central Bank (ECB) and 17 other central banks announced the renewal of the current central bank gold agreement from September this year.
"Adding to gold's general sense of directionlessness was the ECB's announcement that the Central Bank Gold Agreement would be renewed ... but without any sales limit, there is not much purpose to it," Turner said.
Labour strikes at South African platinum and palladium mines continued.
Impala Platinum described as "devastating" the impact on its employees of a 16-week strike at its main South African operation in Rustenburg and said it had lost more than $500 million in revenue.
The company signalled it expected the strike over wages to continue.
Platinum rose 1.2 percent to $1,475.00 an ounce, not far from a two-month high of $1,483.50 hit last week, while palladium was up 0.8 percent at $818.47 an ounce. It touched a 2-1/2-year peak of $827.50 last week.
Spot silver fell 1.4 percent to $19.52 an ounce.