The euro fell 1 percent against the dollar, which hit two-week highs against a basket of currencies , as European Union officials held an emergency meeting to discuss whether the troubles that have plagued Greece, Portugal and Ireland could spread to Italy.

Italian bonds and stocks tumbled, while perceived safe-haven instruments such as German Bunds and the Swiss franc gained, along with euro-denominated gold , which hit record highs above 1,091 euros ($1,583) an ounce.

Friday's US non-farm payrolls data, which showed job creation had virtually ground to a halt, dampened hopes that the world's largest economy would bounce back from its slowdown in the first half of this year and helped gold stage a 3.9 percent weekly rise in its best week since November 2009.

Spot gold rose to a 2-1/2-week high of $1,547.56, before trading at $1,543.96 an ounce, unchanged on the day, at 1100 GMT. US gold August futures were up 0.2 percent at $1,544.70 an ounce.

"There's some lingering reaction to the poor US jobs data ... but this morning has mostly been about Europe and this emergency meeting called today to discuss Italy," said Credit Suisse analyst Tom Kendall.

"As this European crisis develops further, you would expect to see, and we are already seeing, people coming into gold on the physical side, not necessarily through ETFs but through other avenues, and you will see some defensive positioning from investors on the institutional side," he said.

Euro-priced gold rose to an all-time high of 1,095.02 euros an ounce earlier in the day.

CRISIS MEETING

European Council President Herman Van Rompuy called an emergency meeting on Monday morning of top officials dealing with the euro zone debt crisis, reflecting concern the crisis could spread to Italy, the region's third-largest economy.

"If we start to see more pressure on Italy, such as talk of debt default, gold will look to test the previous high," said Darren Heathcote, head of trading at Investec Australia.

Last week, holdings of gold in exchange-traded products (ETFs) rose for a fourth consecutive week, reflecting a pick-up in investor demand for the metal over the last month.

So far this year, however, gold ETF holdings have barely changed, although they have risen in three of the last four months.

Ongoing worries about euro zone nations' sovereign debt and uncertainties around the debt ceiling talks at the US Congress also helped boost gold's safe-haven appeal.

President Barack Obama and Republican leaders failed on Sunday to mend rifts over tax increases and social spending cuts in talks aimed at cutting the US budget deficit and averting a debt default.

On the physical market, buyers have moved to the sidelines after prices advanced nearly $60 in the previous week while scrap sales trickled in, dealers said.

Spot silver fell 0.9 percent to $36.33 an ounce, off the one-month high of $36.82 reached last Friday.

Platinum and palladium were both lower on the day. Platinum was down 0.4 percent, down for a second day, at $1,724 an ounce, while palladium fell 1.0 percent to $764.72.

Copyright Reuters, 2011