Gold prices steadied on Tuesday as the dollar benefited from soft euro zone economic data which pushed the euro lower, while upbeat corporate earnings reports lifted European equity markets.
Spot gold was at $1,288.89 an ounce at 1239 GMT, little changed from $1,288.04 late on Monday, while U.S. gold futures for December delivery were up 80 cents at $1,289.70 an ounce.
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"After the sell-off we saw on Thursday and the reasonable recovery on Friday, $1,280 is quite an important level, and if we start to take out that there is a risk of backing down to the June lows in the $1,240 area," Saxo Bank senior manager Ole Hansen said.
"On the upside, $1,305 is the next level to watch, but in terms of economic data we don't have much this week apart from the ECB (European Central Bank) on Thursday, which is expected to deliver a dovish message," he added. "That could in turn have a negative impact on the euro, add some additional support to the dollar, which is not good for the gold price."
The dollar rose 0.25 percent against a basket of currencies, mostly aided by a lower euro after weaker-than-expected data on Italy's service sector.
The U.S. currency remained below a 10-1/2-month peak, however, due to lower U.S. Treasury yields, whose returns are closely watched by the gold market, given that the metal pays no interest.
"I would keep an eye on bonds because obviously one of the reasons why people tend to be negative on gold is the fact that we are approaching a normalization of U.S. interest rates and speculation about when tightening will commence, but bond yields are still close to the lowest level of the year," Hansen said.
The metal's gains were also kept in check by stronger European equities, which bucked the downtrend in Asian markets.
Markets waited for data on U.S. factory orders and the ISM non-manufacturing PMI on Tuesday for further clues about the world's largest economy.
Data last week was mixed, with second-quarter gross domestic product rebounding sharply but jobs growth in July slowing down.
In a measure of investor sentiment, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 1.79 tonnes to 800.05 tonnes on Monday, the first drop since July 24.
Israel and the Islamist Hamas movement agreed on Monday to an Egyptian-proposed ceasefire to end four weeks of fighting in the Gaza Strip, reducing demand for gold as a haven from risk.
The physical markets have also failed to provide strong support as buying interest has been sluggish globally.
Perth Mint's sales of gold and silver dropped to a three-month low in July as increasing optimism about the global economy curbed appetite for bullion, according to the most recent data on its website.
Spot silver was down 0.4 percent at $20.09 an ounce.
Platinum was down 0.2 percent at $1,452.20 an ounce, while palladium fell 1.2 percent to $839.90 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; editing by Jane Baird and William Hardy)