Gold was last quoted at $259.00/$259.50, up 20 cents from Friday's New York close and up from a low of $257.80 reached in Asian trade.

Dealers said $258.00 remained crucial, although good physical buying was expected in the $250.00 to $255.00 area.

``We are looking for lower prices this week so long as it breaks $257.00, possibly even to that $250.00 level talked about for many months -- there are just too many negative factors to get friendly at the moment,'' one dealer said.

Traders said gold's wild moves on Friday, on the back of the Swiss parliament's rejection of a constitutional amendment easing gold sales, showed how nervous the bullion market was.

And Friday's news that G7 nations would back the sale of up to 10 million ounces of gold from IMF reserves at the right time to help fund debt relief in the world's poorest countries did not bode positively for goldeither.

The sale was expected to raise around $2.7 billion.

``Whilst not being new news either, it was interesting to see the comment that it would be over a period of years so as not to affect the gold price -- a dig at the Bank of England, I feel,'' a trader said.

Britain's announcement on May 7 that it would sell 415 tonnes of its 715 tonnes of gold reserves revived market fears of central bank sales.

The bullion price has fallen more than $30 since the announcement and the market is anxiously looking towards the first British sale of 25 tonnes of gold from reserves on July 6.

Gold's failure to hold Friday's highs given the very short position of the market reinforced many traders' bearish views.

The latest CFTC Commitment of Traders' report figures released on Friday showed investors had further increased their short positions to 264 tonnes from 245 tonnes two weeks previously.

``The speculative short position remains huge but just seems to roll forward remorselessly,'' said analyst, TonyWarwick-Ching, at Virtual Metals Research and Consulting.

Silver was last quoted at $4.96/$4.99 a troy ounce, just higher than the New York close at $4.95/$4.98.

Dealers said they expected silver to trade in the $4.90 to $5.05 area, although a break of $4.85 could see the metal lower and also encourage fund liquidation.

Platinum was last quoted lower at $350.50/$352.50, against the New York close at $351.20/$353.20, and palladium was softer at $337.00/$342.00, against the $339.50/$344.50 New York close.