By Jan Harvey
LONDON (Reuters) - Gold prices rose on Monday, erasing all of the previous week's losses, as a steadier dollar and the resilience of a key chart level removed some downward pressure, while the return of Chinese buyers to the market also lent support.
Prices fell for a fourth week to hit a two-month low on Friday, after an upbeat reading of U.S. wage growth and unemployment supported expectations for a U.S. interest rate hike in December, pushing the dollar and Treasury yields higher.
Gold's resilience above its 200-day moving average at $1,253 an ounce provided some reassurance to buyers, however, helping it rebound. Meanwhile, the dollar came off the boil, steadying below a 10-week high, while geopolitical concerns centred on North Korea and Spain supported gold prices.
Spot gold was up 0.4 percent at $1,280.25 an ounce at 1410 GMT, while U.S. gold futures for December delivery were up $7.70 an ounce at $1,282.60.
"For the time being, gold may have bottomed out," ABN Amro analyst Georgette Boele said. "On Friday people were very reluctant to buy dollars, even though there were enough signals to do so ... and the dollar has come under some pressure again, which is being reflected currently in gold."
"The 200-day moving average has proved to be intact still ... so there were some technical elements playing out," she added. "I think we can go back towards $1,300."
Expectations for a Fed rate hike, she added, are still providing some headwinds to gold, which, as a non-yielding asset, tends to suffer as interest rates rise.
China's central bank held off from adding to gold reserves for an 11th straight month in September, data showed on Monday. China had been a significant official-sector gold buyer in previous years.
On the physical markets, Chinese buyers returned after the Golden Week holiday, another potentially supportive factor for gold. China is, along with India, one of the world's biggest markets for physical gold and demand there is generally stimulated by falling prices.
"The absence of China last week was probably a bearish factor, because China usually is a kind of insurance against lower prices," Commerzbank analyst Carsten Fritsch said.
Speculators cut their net long positions in COMEX gold and silver contracts for the third straight week, in the week to Oct. 3.
Among other metals, silver was up 0.8 percent at $16.91 an ounce, while platinum was down 0.3 percent at $909.75 an ounce and palladium was 0.5 percent higher at $924.25.
(Additional reporting by Apeksha Nair in Bengaluru; Editing by Susan Fenton, Greg Mahlich)
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