Spot gold was last quoted at $302.00/$303.00 a troy ounce, up from the New York close at $301.90/$303.90.

Dealers said the bullion market traded quietly on Monday with lease rates easier and most market players looking for direction.

``Gold is going through a period of comparative peace and quiet with the physical market still sluggish as participant stand back in anticipation of the replacement coming to a conclusion,'' T Hoare Canacord metals analyst Rhona O'Connell said in a report.

A Swiss bullion dealer said the bullion market is expected to remain volatile this week although Wednesday's expiry in over-the-counter (OTC) options should give dealers a better idea of price movements.

"Intraday, we believe the $300.00 level ought to remain a strong support. We think that gold ought to trade between $300 and $305 once again today,'' the dealer said.

Metals trader Standard Bank London said in a report that lower lease rates have weighed on spot gold prices and fears of a liquidity squeeze have now receded.

One-month lending rates were quoted around 1.41 per cent on Monday from 1.65 per cent on Friday and sharply down from the 10 per cent during gold's sharp rally higher after 15 European central banks pledged to limit gold sales, lending and derivatives activity.

```The additional liquidity in the market over the past fortnight has helped to smooth matters, arising partly from Central Bank activity and partly from the unwinding of forward short positions,'' O'Connell said.

Silver was last quoted at $5.24/$5.27 from the close at $5.23/$5.26.

Platinum was last higher at $430.00/$435.00 from the New York close at $429.00/$434.00, while palladium was 50 cents firmer at $390.00/$395.00.

Asian gold lower

Asian spot gold was lower in quiet trade on Monday, and dealers said the price could test below US$300 in a correction from the steep rise in recent weeks.

Gold bullion was quoted at $300.50/301.25 per ounce late on Monday, near the session's low, compared to New York's previous close at $301.90/303.90 on Friday.

A dip below $300 was possible because buying interest was weak and short-covering by producers with troubled hedge books also was lacking, traders said.

"I think gold is most likely to try $298-300 and if it can't hold there, we may see a retracement back to $292," a trader said.

The price has surrendered much of the recent gains. Traders said lower short-term leasing rates have encouraged short-selling by producers and speculators.

Gold teetered on $300 amid good two-way trade most of the Asian day.

"Gold looks a bit weak. Once it breaks $300 we may see some stop loss selling, but I think we will also have bargain-hunting. I prefer to buy on the dip," one trader said.

Retracement by gold needed

The market has been settling down after several weeks of exceptional volatility in prices and leasing rates.

"There is not much buying interest at this (price) level and sentiment is quite mixed. People think gold should have some retracement," a trader said.

Gold has also fallen back from a two-year high of $338 on October 5. The rally was fuelled by short-covering and came after a new European central bank policy placing a cap on gold sales and lending for five years.

Short-term leasing rates were about 1.5 per cent compared with 10 per cent in recent weeks. That has removed a major disincentive to borrowing gold and selling forward by producers.

"In general I think this is a consolidation period and I would like to take the opportunity to buy," a trader in Singapore said. He said gold's near term range was likely to be $298-308.

If gold could hold at $295-298, it stood a good chance to move higher on the fundamental improvement in sentiment after the European central banks' new policy on sales, traders said.

The carry over charge at the Chinese Gold and Silver Exchange Society was -4.9, unchanged from its previous fix.