LONDON: Gold held above $1,250 an ounce in thin Monday volumes, but remained vulnerable to losses as a rally in stocks after reassuring US jobs data curbed the metal's appeal as an alternative investment.
With no major economic data scheduled for Monday and a public holiday in a number of European countries including Germany and France, trading volumes were expected to be thin as markets eyed investment and consumer demand for further cues.
Spot gold edged up 0.2 percent to $1,255.30 an ounce by 0927 GMT. It fell to a four-month low of $1,240.61 early last week, before stabilising.
US gold futures for August delivery gained 0.3 percent to $1,255.60 an ounce.
"We are above the $1,250 level based on last week's news dataflow. Clearly, the ECB easing for the moment is seen as positive," Societe Generale analyst Robin Bhar said. However, gold is still in a downtrend and US monetary policy could tighten further, Bhar said.
European markets rose, looking for their 10th straight week of gains after last week's bumper set of easing measures from the European Central Bank.
The dollar was up 0.1 percent against a basket of currencies, benefiting from strong US borrowing costs. Friday data showed that US employment returned to its pre-recession peak in May, with a solid pace of hiring that offered confirmation the economy had snapped back from a winter slump.
After the data, dealers who had bet against gold in the run-up to the announcement, expecting a strong number, rushed to cover positions as the metal held above $1,240 an ounce, traders said. "I would still want to sell rallies because this rally was based on short-covering and not fresh buying
if you look at the CFTC positioning, the longs have been cut and that shows that this rally probably doesn't have the power to significantly move prices higher," Bhar said. Hedge funds and money managers cut their bullish bets in gold futures and options in the week to June 3 to their lowest level since mid-January, according to data from the US Commodity Futures Trading Commission on Friday. Among other precious metals, platinum gained for a fourth straight session as investors awaited the outcome of wage negotiations in top producer South Africa.
South Africa's AMCU union and major platinum producers were due to meet on Monday for more talks aimed at ending a five-month strike, with the government threatening to pull out of mediation if no deal is agreed. The union had said last week its wage demand of 12,500 rand ($1,200) per month was "non-negotiable". Platinum prices rose 0.4 percent to $1,448.24 an ounce.
"The realisation that optimism on wage talks in South Africa was overdone likely prompted longs to rebuild positions and shorts to seek cover," UBS said in a note.
"Headline risks abound as negotiations resume today." Palladium, of which South Africa is the second-biggest producer, stood flat at $840.30 an ounce.
Silver rose 0.7 percent to $19.10 an ounce.
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