Gold rally runs out of steam before $1,600 mark
Spot gold added 90c an ounce on Monday in tepid trading to end at $1,592.50 an ounce after failing to breach the psychologically important $1,600 an ounce level in morning trade.
Traders said support given to Greece to stay in the Eurozone at the weekend's G8 meeting and a stronger dollar hurt the yellow metal.
Reuters reports on Friday US data showed "hedge funds and other money managers liquidated more than $2 billion in US gold futures over a week."
That could come back to haunt them as gold enjoyed a $50 an ounce rally on Thursday and Friday, recovering from an intra-day low Wednesday of $1,528 as investors sold the precious metal to cover losses elsewhere.
That level briefly signaled a bear market with the precious metal 20% below the record of $1,913 hit on August 23 last year.
The sharp turnaround in sentiment in the bullion market has some asking whether the rally is a dead cat bounce or perhaps the best chance to buy before prices rocket.
Gold bulls say a new round of monetary easing in the US – a distinct possibility – and possible similar programs in the crisis-ridden Eurozone will restore the yellow metal's status as an inflation hedge and wealth preserver.
Flooding markets with cheap money would also hurt the dollar, further boosting the metal's price.