Gold prices crept up on Monday as the dollar touched a two-month low versus the euro, but the gains were limited despite a retreat in Asian equities led by China.

Heavy selling of blue-chip shares dragged China's stock markets sharply lower, pressured by the spectre of rising borrowing costs hitting company profits amid an increasing regulatory crackdown on risky financing.

“Thus far we have yet to see any safe-haven premium creep into gold's price to reflect nervousness in equities and China bonds,” said Jeffrey Halley, senior market analyst with OANDA.

Spot gold had risen 0.2 per cent to $1,290.66 an ounce by 0756 GMT. US gold futures for December delivery were up 0.2 per cent at $1,290.

The dollar's losses against the euro, thanks to strong German business confidence, made dollar-denominated gold cheaper for holders of other currencies.

“The inverse relationship between the dollar and gold prices is in effect,” said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

“But I don't think that kind of relationship is robust enough to wager larger bets ... While prices are moving up, movement will still be rangebound.”

Fed Chair nominee

Investors will be looking to the Congressional hearing on Federal Reserve Chair nominee Jerome Powell on Tuesday. Last week, minutes of the Fed's previous meeting revealed that some policymakers had voiced concerns over inflation outlook and emphasised they would be looking at upcoming economic data before deciding the timing of future rate rises.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

Also on Tuesday, US President Donald Trump will meet Senate Republicans to discuss their party's efforts to pass tax reform legislation.

Spot gold is biased to drop to $1,283 per ounce, as it failed to break resistance at $1,296, according to Reuters technical analyst Wang Tao.

Among other precious metals, silver rose 0.5 per cent to $17.057 an ounce, while platinum was flat at $940.50 an ounce. Palladium slipped 0.4 per cent to $993.50 an ounce.

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