Gold prices held above $1,570 an ounce on Monday, taking a breather after last week's sharp correction as traders took to the sidelines ahead of a European Union summit later in the week, and further economic data from the United States. Spot gold was little changed at $1,571.29 an ounce at 1444 GMT against $1,571.44 late on Friday, while US gold futures for August delivery were up $5.60 an ounce at $1,572.50.
At the summit meeting in Brussels on Thursday and Friday, European leaders are set to discuss specific steps towards a cross-border banking union, closer fiscal integration and the possibility of a debt redemption fund. Muted expectations for the meeting, together with concerns over global economic growth, prompted investors to scale back exposure to riskier assets on Monday.
European shares fell for a third session, the euro wilted and Spanish and Italian government bond yields rose as hopes faded that the summit will produce game-changing measures to tackle the debt crisis. Gold was little changed. "We're at quarter-end as well as month-end, and on Thursday (we have) the EU summit," said Afshin Nabavi, head of trading at MKS Finance in Geneva.
"I think we'll most probably remain sideways between $1,550-1,580, with a better possibility of testing $1,600." The metal ended Friday with its worst weekly performance since May, down 3.5 percent after US authorities disappointed bulls by failing to launch more aggressive monetary policy measures, like quantitative easing.
"The broader picture suggests gold could move a bit lower, but it will stay in this range until we see definitively whether the bulls will be right about the printing presses at central banks ramping up again, or whether they will hold fire until the world gets a lot worse," Macquarie analyst Hayden Atkins said.
"It is in a wait-and-see kind of mode." Next week's June US non-farm payrolls report is likely to be central to this, he said. An extremely poor report for May was the catalyst for gold's last rally above $1,600 an ounce. From a technical perspective, chart support held for gold around the $1,560 an ounce level last week. Below that, support around the metal's May low below $1,530 is expected to cushion any fall.
"We prefer to buy dips in gold and expect the range lows near $1,520 to underpin a move back toward the $1,640 area," Barclays Capital said in a note. Analysts say a break of the $1,640 June high will be needed to re-establish an uptrend. On the physical markets, a recovery in the rupee from last week's record lows versus the dollar, which pushed up local gold prices, failed to stimulate fresh buying in major consumer India. Traders said they were awaiting further price correction.
Among other precious metals, silver was down 0.2 percent at $26.78 an ounce. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, rose to its highest since October 2010 on Monday at 58.6 as the grey metal underperformed.
Spot platinum was up 0.1 percent at $1,428.25 an ounce, while spot palladium was flat at $603.75 an ounce. Given economic problems in the United States and euro zone, "we believe the immediate upside for prices of platinum group metals is limited", Bank of America Merrill Lynch said in a note.
"Nevertheless, there is scope for both platinum and palladium to perform better next year should the global economy start to stabilise," it added. "Hence, our preferred long position in precious metals for (the second quarter) remains gold. Nevertheless, we would swap a long gold trade into a long platinum/ palladium position as we move through next year."