Gold prices gained buying traction above $5,000 amid recovering risk sentiment and prolonged profit-taking, as market players braced for key US economic data including the labor and inflation reports this week.
At 9 am, gold was at $5,028, down 0.61% since it opened early Tuesday in Asian trading.
Gold prices eased after posting two straight days of gains, as investors re-increased exposure to equity markets on recovering global risk sentiment.
The S&P 500 index continued its rally to an all-time high, signaling investor confidence is recovering after a volatile trading week.
In addition, expectations of diplomatic talks between the United States (US) and Iran also weighed on demand for safe-haven assets like gold.
Iranian President Masoud Pezeshkian described Friday's nuclear talks as a positive development, while stressing his rejection of any form of pressure or intimidation.
However, the potential downside for gold prices is expected to remain limited, supported by continued physical demand, particularly from China's central bank. Latest data showed that the People's Bank of China (PBOC) continued to buy gold for the 15th consecutive month in January, reflecting ongoing efforts to diversify international reserves.
The PBOC's gold holdings rose to 74.19 million refined troy ounces from 74.15 million ounces in the previous month.
Market attention now turns to the US jobs data for January due on Wednesday, which could provide a clearer indication of the direction of the US Federal Reserve's (Fed) monetary policy.
The US economy is expected to add around 70,000 jobs, while the unemployment rate is forecast to remain at 4.4%.
On Friday, US Consumer Price Index (CPI) inflation data is expected to be the main driver of market movement.
Any signs of a slowdown in the labor market or a decline in inflationary pressures have the potential to weaken the value of the US dollar, thus supporting commodity price movements, including gold, in the near term.
