Gold edged up on Tuesday, aided by a slightly weaker dollar, but concerns about Spain's high borrowing costs and its struggling banking sector kept gains in check.
Bullion has fallen more than 5 percent so far this month, on course for its biggest monthly decline since December, as fear of Greece's exit from the euro zone as well as Spain's crisis sank the euro and boosted the dollar index to a 20-month high, weighing on gold priced in the greenback.
The impact of a strong dollar more than offset gold's safe-haven appeal, especially as the prospect of further monetary easing by the U.S. central bank in the near term has dimmed.
"If Spain ended up seeking an international bailout, it would trigger more panic than Greece," said Li Ning, an analyst at Shanghai CIFCO Futures.
"Such concern is reflected in the enormous pressure at the $1,600 level, as the dollar index appears to retain an uptrend."
Gold has attempted to breach that resistance level a few times over the past week or so without success, which could in turn send prices lower, Li cautioned.
Spot gold gained 0.3 percent to $1,577.42 an ounce by 0647 GMT, retreating from a one-week high of $1,583.50 hit the previous session.
U.S. gold rose nearly half a percent to $1,576.50.
As a sign of persistent worries about Spain's finances, the country's 10-year borrowing costs rose to near the dangerous 7-percent level, and the risk premium on Spanish government debt over German Bund hit a euro-era high, as investors sought refuge in assets perceived to be low-risk.
Trading was anaemic as investors await the key U.S. non-farm payrolls data and China official purchasing managers index data later in the week for clues to how the world's top two economies have performed during the euro zone turmoil.
"People don't know where things might go and the physical market is quiet," said a Singapore-based dealer, adding that buying from both China and India has been slow.
In a move that may support demand for platinum and palladium, China may soon resume paying subsidies to rural residents who trade in old vehicles for new, fuel-efficient ones, in an effort to rekindle demand amid a slowdown in the world's largest auto market.
Spot platinum was little changed at $1,431.49, and spot palladium traded nearly flat at $602.12. Palladium was the worst performer in the precious metals complex with a nearly 8-percent year-to-date decline.
Current platinum prices could endanger investment plans to allow platinum miner Lonmin
Impala Platinum, the world's second largest platinum producer, said refined platinum fell 46 percent in the three months to the end of March and its embattled Rustenburg mine would return to pre-strike levels in June.