NEW YORK/LONDON Gold eked out a small gain on Monday as lingering uncertainty over the euro zone debt crisis following Greece's elections and a policy meeting by the U.S. Federal Reserve lifted bullion from its early losses.
Safe-haven bids boosted gold as G20 leaders pressed Europe to do whatever it takes to combat Europe's crisis after a victory for pro-bailout parties in a Greek vote reduced the chances of a euro breakup but failed to calm financial markets.
Monday's trading volume of U.S. gold stood at just over half of its 30-day average, and gold option volatility also tumbled as investors opted to stay on the sidelines ahead of a key Fed meeting later this week.
"With everything going on in Europe and a slowing economy here, volume is very light today because everybody is very skittish going forward about what the direction of gold is going to be," said Anthony Neglia, president of Tower Trading and a COMEX gold options floor trader in New York.
Spot gold was up 30 cents at $1,628.09 an ounce by 2:11 p.m. EDT (1811 GMT), recovering from an early low of $1,606.49. Prior to Monday, bullion had ended higher in each of the last six sessions.
U.S. gold futures for August delivery settled down $1.10 at $1,627. Trading volume was about 40 percent below its 30-day average, preliminary Reuters data showed, consistent with last week's weak trend.
Analysts said that global equities markets' relief at the Greek vote was offset by worries over its unresolved problems, the lack of a clear plan for the euro zone as a whole, and uncertainty over a meeting of Group of 20 world leaders this week.
"The fact that risk appetite has not rebounded more decisively after the Greek elections may suggest that the markets will push for a broader solution for the euro zone, one that would remove the contagion risk from Spain and Italy in particular," said BNP Paribas analyst Anne-Laure Tremblay in London.
Tremblay said that gold appears to more sensitive to central bank action than to variations in risk appetite.
Given a U.S. outlook that is weak but not recessionary, the Fed meeting on Wednesday could opt for extending "Operation Twist," its effort to drive down long-term borrowing costs by selling short-term securities to buy longer-term ones, economists said.
The metal had rallied as much as 15 percent after the Fed in January said it would keep interest rates near zero until at least late 2014. Gold has since tumbled several times, however, after Fed Chairman Ben Bernanke mentioned no further easing in his congressional testimonies.
Year to date, gold is up about 4 percent.
PHYSICAL DEMAND WEAK
Physical gold bullion demand, which has weighed down on prices of the metal, was weak in top gold consumer India, and it is likely to remain sluggish in coming months due to the lack of weddings and festivals during the wet season, dealers said.
Among other precious metals, silver edged up 0.3 percent at $28.75 an ounce. Spot platinum eased 0.1 percent at $1,474.49 an ounce, while spot palladium was up 1.1 percent at $630.25 an ounce.
(Editing by Anthony Barker and Marguerita Choy)
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