Gold rebounded slightly on Monday from a fall of one percent in the previous session, shrugging off China's tightening move on Friday, as physical buying continued to buoy prices. China's central bank raised lenders' required reserves on Friday for the fourth time in just over two months, stepping up the fight against inflation that it has vowed will be a top priority for the year.
Eyes are on a suite of data from Beijing due on Thursday, including December inflation and fourth-quarter economic growth, which might give clues on how much tightening would be needed in the next few months. But economic conditions in the US and Europe will be a more decisive factor behind gold prices, some analysts said. "We may see gold prices pressured by the upcoming China data, but just for a session or two. The more important factor is still the United States," said Hou Xinqiang, an analyst at Jinrui Futures.
The US economy still needs support from the Federal Reserve even as recent data point to firmer growth prospects, top officials at the Federal Reserve said. Spot gold edged up 0.1 percent to $1,362.76 an ounce by 0714 GMT, after touching a one-week low of $1,354.99 on Friday.
US gold futures lost 1.8 percent to $1,362.4 an ounce. Spot gold will extend its loss to $1,349 per ounce, as a downward wave "C" or wave (3) is advancing, said Wang Tao, a Reuters market analyst. Spot silver edged down 0.3 percent to $28.35 an ounce, after falling to a one-month low of $28.09 in the previous session. It rose to a historical high just below $50 on January 18, 1980, according to LBMA data.