Gold dipped slightly on Monday after posting a third successive weekly gain last week that took the price to its highest in six-months, when a softer report on the US jobs market fed expectations for US monetary policy to remain loose.
Friday's monthly US employment report showed fewer jobs were created than expected, which boosted the gold price by more than 2%, its strongest one-day gain this month.
Gold has risen against a backdrop of mounting expectations for support for the US economy by the Federal Reserve, possibly as early as Thursday when the central bank's Federal Open Market Committee (FOMC) releases its decision on interest rates.
Investment in gold-backed exchange-traded products reached a record high last week, while holdings of US gold futures by speculators rose to their highest in a year.
Spot gold was down 0.3% at $1 730.30 an ounce by 1121 GMT, having risen last week by 2.7%, racking up a third consecutive weekly increase and its longest stretch of gains since the start of the year.
"This revising of (US expectations) was something we thought was main event risk and also coincided with the (European Central Bank) providing a much less hostile environment for European assets and that reduces the capital flight from the euro area into the United States," Michael Lewis, an analyst at Deutsche Bank, said.
"The combination of QE (quantitative easing) and dollar weakness has reignited the interest of the private sector. Central banks and the public sector have already been aggressive buyers of gold, so it doesn't change our view. It makes us more relaxed about the view," Lewis said.
Deutsche Bank analysts expect the gold price to average $1 726 an ounce this year, before rallying to $2 000 early next year, making their outlook one of the more bullish from a Reuters mid-year price survey in July.
The US economy created just 96 000 jobs in August, well below expectations and less than what is needed to keep up with population growth, a government report showed on Friday.
The unemployment rate fell to 8.1% from 8.3% but only as a result of many US jobseekers abandoning the labour market, further reinforcing the case for more bond buying, or quantitative easing.
Since the Fed first used QE as a means to encourage growth in late 2008, gold has more than doubled in value, hitting a record $1 920.30 an ounce last September.
The ensuing low level of real interest rates, which strip out the effect of inflation, put pressure on the dollar and help to create a favourable environment for investing in gold, which profits from dollar weakness.
Holdings of gold in the major ETPs last week touched a record 72.37-million ounces, having drawn in nearly 2.0-million ounces of metal in a month.
The ECB last week outlined its proposal for buying the government bonds of eurozone member states that request formal financial aid, which has helped drive the single European currency to five-month highs against the dollar.
Gold in euros was flat on the day at 1 353.18 euros an ounce. On Friday, euro/gold struck a session peak of 1360.82 euros, bringing it within just 13 euros of last September's record highs.
In other news, Hong Kong's July gold shipments to China nearly doubled on the year, while exports over the first seven months exceeded total 2011 volumes, suggesting China is well on its way to overtake India as the world's top gold consumer.
Palladium outperformed the rest of the precious metal complex, rising by 1.0 percent on the day to $656.50 an ounce to hold around its highest since early May, helped by Chinese car sales figures.
The China Association of Automobile Manufacturers said on Monday automakers shipped 1.5-million passenger cars, trucks and buses to dealerships last month. Sales of passenger cars in the first eight months of the year rose 8% to 9.95-million.
Palladium relies heavily on the Chinese car market, the world's largest, for demand, where it is used in catalytic converters for gasoline-powered engines.
Platinum rose 0.4 percent to $1,587.49 an ounce.
The platinum price has rallied by more than 14 percent in a month after a violent strike in South Africa shuttered the operations of Lonmin, the world's third-largest producer.
Silver fell 0.7 percent to $33.44 an ounce. The price touched an intraday peak of $33.95, its highest since March this year.