Precious metal has risen more than 9 percent already this year
Gold rose further on Monday as gains on the Nikkei helped it offset pressure from a firm US dollar, but some investors were likely to stay on the sidelines ahead of a US Federal Reserve meeting this week, which could potentially weigh on the precious metal.
Gold has risen more than 9 percent this year, building on 11 consecutive years of increases, after the Federal Reserve said it would keep rates near zero until at least 2014. But the Fed may have to reconsider any plans for additional monetary easing when it meets on Tuesday if there are more signs the US economy is recovering.
Spot gold was steady at US$1,708.56 an ounce by 0248 GMT after rising as high as US$1,713.80. On Friday, gold rose nearly 1 percent on higher crude oil and US equities after U.S. employment grew solidly for a third straight month in February - beating expectations.
Bullion struck a record around US$1,920 an ounce last September. "We will see more data coming out of the US, and whether or not there will be a QE3," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, referring to a possible third bond-buying programme to lower interest rates.
"If there's no QE3, then there will be disappointed-selling again. If the dollar continues strengthening, then of course, gold will be under pressure. There's a little bit of physical buying. Some people cover their shorts after the weekend."
US April gold fell US$2.20 an ounce to US$1,709.30 an ounce.
Money managers, including hedge funds and other large speculators, cut their bullish bets in gold to the lowest level in five weeks during the week of March 6, as prices unwound from a late-February peak near US$1,800 per ounce.
The Nikkei share average broke above 10,000 to a fresh seven-month high on Monday, boosted by another US jobs report that signalled a strengthening US economic recovery, while technical factors pointed to the index heading higher.
Gold often tracks equities because it is currently perceived as a risk asset, especially during the financial turmoil in Europe, where some investors will cash in the metal to cover losses in other markets.
"Gold looks to have recovered from last week's technical dip, but remains vulnerable to correction within a broadly positive longer term trend. There is a risk we may see renewed downside pressure on bullion as we move towards the end of the quarter," ANZ said in a note.
"In the third and fourth quarters of last year hedge fund selling in the final two-three weeks of the quarter weighed on the market. Improving equity markets in the first quarter of 2012 may mitigate that and we are fairly comfortable with our end-quarter forecast of US$1,720."
Among currencies, the dollar held around three-week highs against a basket of major currencies on Monday after better-than-expected US job data scaled back expectations for more easing ahead of the Fed meeting.
The euro hardly moved after suffering what traders called a buy-the-rumour-sell-the-fact fall on Greece's bond swap deal with private creditors which will clear the way for a new bailout.
Greece's successful debt restructuring brought some relief to riskier assets on Friday, but poor euro zone growth prospects and fears Portugal may also impose losses on creditors were likely to limit the fall in yields on weaker sovereign bonds.