Gold steadied on Monday after last week's slide as a retreat in the dollar lent support, but indications that the Federal Reserve may still raise interest rates this year despite recent market turmoil weighed on the metal.
Spot gold was flat at USD 1,132.98 an ounce at 0934 GMT, while US gold futures for December delivery were down 90 cents an ounce at USD 1,133.10. The metal fell 2.3 percent last week as a sell-off in Chinese equities rattled wider markets.
The Federal Reserve left open the possibility of a September rate rise at a central banking conference at Jackson Hole, Wyoming, this weekend, though several officials indicated that prolonged financial market turmoil might delay such a move.
In a speech careful not to overreact to a possible Chinese slowdown, Fed Vice Chairman Stanley Fischer said on Saturday that US inflation is likely to rebound as pressure from the dollar fades, allowing for a gradual rise in rates.
The Fed has indicated that an increase is heavily dependent on ongoing data.
"What is really significant is the upcoming US nonfarm payroll data (on Friday)," Naeem Aslam, chief market analyst at Ava Trade, said. "If we see the average hourly income and labour market strengthening further, this will trigger a sell-off for gold."
"Yes, China will be another major focus, but perhaps not (as) much, as the Fed rate hike decision is data-dependent and there is no other data more important than this."
Global financial markets looked set for another rough week on Monday, with stocks, commodities and the dollar losing ground ahead of US data and surveys that are likely to point to further weakness in China.
Gold is still on track to end August higher after worries over a slowing Chinese economy sparked a wave of short-covering earlier this month following the metal's slide to 5-1/2-year lows in July.
Some had initially thought a slowdown in China might prompt the Fed to postpone a rate rise.Hedge funds and money managers raised bullish bets in COMEX gold in the week ended Aug. 25, US Commodity Futures Trading Commission data showed.
However, investor sentiment remains fragile.
"Neither current concerns about China nor a potential postponement of the first interest rate hike in the United States should significantly revive investment demand for gold," Julius Baer said in a note.
Spot silver was down 0.4 percent at USD 14.53 an ounce, while platinum was down 1.6 percent at USD 1,000 and palladium was up 0.3 percent at USD 585.25.
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