LONDON: Gold firmed as European equities fell on Monday, but prices struggled to reach the $1,200 per ounce level after a robust U.S. nonfarm payrolls report pushed the dollar to a more than five-year high.
Spot gold rose 0.3 percent to $1,195.10 an ounce by 1037 GMT. The metal lost 1.1 percent on Friday when U.S. data showed employers added the largest number of workers in nearly three years in November and wage gains picked up.
U.S. gold futures rose 0.4 percent to $1,195.50 an ounce.
The strength in the economy could draw the Federal Reserve closer to raising interest rates, lift the dollar and in turn decrease demand for gold.
"Everybody has factored in interest rate increases next year and everybody is expecting continued dollar strength ... so we tend to be quite neutral on gold at the moment," Citi analyst David Wilson said.
The dollar was trading close to its highest since March 2009 on the back of the strong jobs report.
Gold was boosted by central bank liquidity and a low interest rate environment in the years after the 2008 financial crisis, which encourages investors to put money into non-interest-bearing assets.
"We suspect that gold will likely be at its most vulnerable over next three to six months, which is when we see the highest likelihood of a rate hike that should sweep the dollar higher," INTL FCStone analyst Edward Meir said.
Gold was supported, however, by lower European shares following soft economic data from China and Japan and an S&P downgrade of Italy's credit rating.
For now, some market players say gold could hold near $1,190 levels, based on recent data on investor positioning.
Hedge funds and money managers pushed a bullish position in U.S. gold contracts to the highest level since August in the week to Dec. 2, data shows.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.12 percent to 720.91 tonnes on Friday, though still close to a six-year low.
"There looks to be some underlying strength in the market however, as the yellow metal convincingly held $1,180 on Friday following the nonfarm payroll print," said Sam Laughlin, metals dealer at MKS Group.
Technically, immediate support will come in around $1,186, while on the topside $1,210-$1,220 will provide resistance, he said.
Among other precious metals, platinum rose 1 percent to $1,227.25 an ounce. Silver was up 0.4 percent at $16.32 an ounce and palladium rose 0.4 percent to $801 an ounce.
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