The metal pared losses as US and European shares came off their highs when depressed oil prices failed to sustain a rally, while the US dollar rose for the third straight session. The rise in stocks suggested risk appetite is recovering after last week's rout. "(We're) looking for gold to perhaps get down to the $1,055-1,060 level as we expect a bounce in the equity markets to continue on account of earnings that likely will be no worse than estimates, stabilizing macro readings from a number of countries, including China ... and a possible jump in oil," said INTL FCStone analyst Edward Meir.
The metal's early January rise ran out of steam late last week after prices hit resistance at their 100-day moving average. Gains have been capped by concerns over higher US interest rates. Since the US Federal Reserve raised rates in December, attention has shifted to how many hikes will follow in 2016. Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 2.1 tonnes on Monday, data from the fund showed.
Among other precious metals, palladium took the biggest dive, sliding 6.3 percent to a 5-1/2 year low of $449.55 an ounce before paring losses to $473.40 an ounce. "Concerns over China have continued to dominate pricing trends across industrial and PGM metals since the start of the year," Citi Research said in a note.
"An added bearish factor for palladium has been investor concerns over the impact of rising interest rates on auto sales in the US, a key gasoline market. Following a record year for US car sales in 2015, slower 2016 US auto sales were already hardwired into most market forecasts." Silver was down 0.3 percent at $13.82 an ounce, while platinum was down 1.2 percent at $832.95 an ounce.