After hitting $1,245.86 an ounce earlier in the session, its highest since December 17, spot gold in the US eased to $1,238.10 an ounce by 1109 GMT, still up 0.2%. February US gold futures, however, dropped 0.1% to $1,237.40 an ounce. In Delhi, gold prices held steady at R30,360 per 10 gm on restricted purchases at such elevated price levels.
However, market participants cautioned that the upward momentum in global gold prices so far in the new year may only last for a few weeks due to some index rebalancing activity, but the metal could record another drop in value in 2014, Religare said in a research report. Gold gained (on Monday) as equity markets were subdued on Friday, while the dollar was up 0.2% against a basket of main currencies," it added.
Gold has rallied by 2.7% this year in the global market, following a 28% loss in 2014 its steepest annual plunge since 1982 and capping 12 straight years of advance.
Analysts said Chinese demand picked up in the build-up to the the Lunar New Year and trading volumes on the Shanghai Gold Exchange scaled an eight-month peak on Monday. They added that weaker equities will better influence a rise in gold than a stronger dollar, as investors will seek to tap the haven value of the precious metal. Gold usually shares an inverse relation with the dollar.
Premiums on the Shanghai Gold Exchange, which is a physical trading platform, rose to $20 an ounce to the spot price in London from $17 on Friday.
For the 99.99% purity gold, traded volumes on the exchange were 24.86 tonnes on Monday, the maximum daily volume since May 3.
The precious metal took support from the fact that Asian shares dropped to a two-week low after data suggested growth in China's services sector slowed sharply in December. Aided by improved outlook for the US economy, the dollar, too, hovered near a four-week peak, but gold still managed some gains in early trading.
After its biggest weekly fall in six months last week, brent crude oil rebounded in intraday trade on Monday on scepticism over the scale of supplies from the restart of a key Libyan field that had brightened availability prospects of the crude variant last week.
February brent crude futures surged $1.07 to a high of $107.96 before easing to trade around $107.85 by 1045 GMT. US crude increased 50 cents to $94.46 a barrel. The contract lost $1.48 a barrel on Friday and posted its biggest weekly drop since June 2012.