Bargain hunters helped gold rise on Monday from a six-month low hit in the previous session as Asian players returned to the physical market from a week-long holiday.
Gold rose 0.2 percent to $1,611.87 by 1306 GMT, having fallen to $1,598.04 on Friday on heavy technical selling pressure. U.S. gold for April delivery inched up 0.1 percent to $1,611.80.
The metal has been unable to break above $1,700 in recent weeks and fell through key support levels, leaving it vulnerable to further losses in the absence of Asian physical traders last week, when prices slipped 3.8 percent, the largest drop since May last year.
"After the technically driven sell-off, probably exacerbated by the lack of physical interest from Asia, the phones are not exactly ringing off the hook, but we have a lot of interested physical clients ... looking to take advantage of current weakness," Jeffrey Rhodes, chief executive of INTL Commodities, said.
Chinese participants returned on Monday from last week's holiday, providing some renewed support to nervous investors.
The spot contract for gold of 99.99 purity on the Shanghai Gold Exchange dropped to 326.40 yuan ($52.37) a gram, its lowest in nearly seven months. The fall triggered strong physical buying, with volumes exceeding a record high of 22 tonnes on SGE.
"This week investors in China return with a strong desire to pick up metal at cheaper prices, with turnover on the SGE surging to an all-time high," broker UBS said in a note.
"This should help calm some of the uneasiness, but unless there is a strong fundamental upside catalyst, gold is likely to struggle, and a move below $1,600 could not be ruled out with certainty at this stage."
Further gains were capped by euro weakness against the dollar.
The market was awaiting an address by European Central Bank President Mario Draghi to the euro zone's parliament and a possible hint on the outlook for the single currency after a G20 meeting.
Financial leaders from the world's 20 biggest economies promised on Saturday not to devalue their currencies to boost exports, aiming to defuse talk of currency wars that had been roiling the markets.
Hedge funds and some big speculators cut their bullish bets on U.S. commodities, taking aim particularly at gold, which has lost some of its lustre this year, data released on Friday showed.
A raft of business surveys this week will be studied for confirmation of hopes that a dire fourth quarter of 2012 marked