Spot gold ventured back on Monday from close to a three-month top hit the session some time recently, after a U.S. employments report cast some uncertainty over prospects for a faster pace of rate climbs this year and pushed up the dollar.
U.S. employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded, but rising wages and an unemployment rate at an eight-year low suggested the labour market recovery remains firm.
But an increasingly dovish trend by global central banks as they battle prolonged economic weakness could make a solid case to get back into the safe-haven metal.
UBS cut expectations for U.S. GDP growth this year, and in that kind of world, people have cut expectations for Fed interest rate normalization. If the Fed holds off raising rates, then the USD will be weaker and gold should outperform.
Spot gold had slipped by 0.6 percent to $1,165.86 an ounce,as it fell back from its highest since Oct. 28 at $1,174.50 hit in the previous session.
U.S. gold climbed 0.8 percent to $1,166.60.
Meanwhile, hedge funds and money managers boosted their bullish bet in COMEX gold to a three-month high in the week to Feb. 2, U.S. Commodity Futures Trading Commission data showed on Friday.
The recent CFTC data suggests speculators continue to trim short positions and bulls are also returning to the market.The uncertainty around the Fed tightening cycle is likely to support gold prices in coming weeks.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, also said its holdings rose 0.70 percent to 698.46 tonnes on Friday from 693.62 tonnes on Thursday.