SINGAPORE: Gold prices held firm on Monday after their best week in a month, as the dollar and global stock markets slipped on worries the United States was close to reining in measures to stimulate its economy.
US and European shares fell last week for the first time in five weeks, on fears the Federal Reserve would trim its monetary easing programme, boosting the safe-haven appeal of bullion.
Gold marked its biggest weekly percentage gain in a month last week, but is down nearly 17 percent this year, following 12 years of annual gains.
"The price hike of last week suggests that we have formed a base below $1,350," said Tim Riddell, head of ANZ Global Markets Research, Asia.
"As long as gold remains at about $1,370, the chances of a rebound back towards the $1,450 level seem to be in place."
Spot gold was up 0.4 percent at $1,391.01 an ounce by 0240 GMT, not far off its two-year low of $1,321.35 in mid-April. It is headed for its seventh monthly drop in the last eight months.
US gold rose 0.25 percent to $1,390.00.
Fed Chairman Ben Bernanke raised the possibility of gradually reducing the Fed's bond purchases if the labor market improved in a sustainable way, and warned of risks to holding interest rates too low for too long.
But he also said he needed to see more strength in the economy before making a decision on halting stimulus.
Comments by St. Louis Fed President James Bullard that US inflation would have to pick up before he voted to scale back stimulus have supported gold.
Commodity markets were subdued, with British and US financial markets closed on Monday for public holidays. There is also little in the way of major economic news due out of Asia.
Japan's Nikkei share average fell 3 percent on Monday, and could endure another volatile session as investors remained on edge after last week's turbulent trade that drove the market to its worst one-day loss in two years.
The dollar slipped against the yen after posting on Friday its worst week against the yen in a year.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.24 percent to 1016.16 tonnes on Friday to the lowest in more than four years.
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