LONDON: Gold erased earlier losses on Monday, extending three weeks of gains as the dollar fell on expectations that the US Federal Reserve at a meeting later in the week will keep interest rates low for some time.
Spot gold was up 0.1 percent to $1,334.31 an ounce by 1132 GMT, recovering from a decline earlier in the day. Last week it regained the $1,300 level for the first time in a month. Prices posted a combined 9 percent over the last three weeks.
US gold futures for August rose $12.50 to $1,334 an ounce.
"This week offers several opportunities to test whether the rally can be sustained with the central banks' meetings and the US non-farm payrolls on Friday," Saxo Bank senior manager Ole Hansen said.
"Overall, it's difficult to become too carried away at the moment and we should monitor the movements in the exchange-traded funds (ETFs) and the gold/silver ratio," he added.
The dollar was under pressure around an earlier five-week trough, while benchmark US 10-year Treasury yields flattened below 2.6 percent and European equities rebounded after a two-session dip.
A weaker dollar makes dollar-priced gold less expensive for holders of other currencies.
The Fed's Federal Open Market Committee (FOMC) begins a two-day meeting on Tuesday.
The European Central Bank and the Bank of England also meet this week and are expected to repeat or refine their previous guidance that borrowing costs would remain extraordinarily low as long as growth is sub-par and inflation is not a threat.
Bullion has lost a fifth of its value this year as signs of an economic recovery in the United States have sparked speculation of an end to easy central bank money.
But comments from Chairman Ben Bernanke this month have reassured investors that the central bank will be slow to scale back monetary stimulus, pushing gold up for three straight weeks.
Investors, however, want more guidance on the exact timing of any scaleback, which still remains unclear, and are keenly watching every piece of economic data to help gauge where the Fed is heading.
"Prices are unlikely to maintain their upward momentum in the seasonally weak period for demand unless US macro data deteriorate, driving further short covering-led support," Barclays said in a note.
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