Gold pared losses in afternoon trade on Monday after falling 1.6 percent on profit-taking, with investors keeping an eye on currency and oil markets for leads.

A marginal drop in oil prices and a recovery in the dollar against the euro kept the market under pressure, dealers said.

James Steel, analyst at HSBC Bank, said the gold market, which rallied in recent sessions, needed supportive news.

"It will stabilise at around $620 an ounce, but we are going to need some bullish news to galvanise the market higher," he said, adding prices were unlikely to collapse given long-term dollar weakness.

Spot gold hit a high of $632 an ounce before falling as low as $620.00. It was quoted at $625.40/626.90 by 1446 GMT, compared with $629.80/631.30 in New York late on Friday.

Gold touched $637 on Friday, its highest in a month, after the dollar fell against major currencies.

The dollar rose against the euro, off one-month lows struck after a weaker than expected U.S. jobs report on Friday tempered expectations for the U.S. Federal Reserve to raise interest rates again in August.

"... we do not expect any further gains until the Fed has clearly finished -- or at least paused -- from its rate hiking," said John Reade, precious metals analyst at UBS Investment bank.

UBS lifted its short-term forecast for gold prices to $600 in one month from now and $650 in three months, from $550 and $580 respectively. It saw silver at $10.80 and $12.50 after one month and three months and platinum prices at $1,200 and $1,300.

Oil prices edged below $74 a barrel, extending the previous session's 1.4 percent fall on expectations of progress in talks on Iran's nuclear programme. Oil is often seen as a hedge against inflation.

"Gold looks under pressure," Stephen Briggs, economist at SG Corporate and Investment Banking, said. "The broad longer-term direction is upwards because commodities are still very fashionable, but it needs to take a bit of pause at the moment."

Some dealers said that political tension in north Asia, triggered last week by North Korea's missile tests, would offer support to safe-haven gold.

Japan will seek a U.N. Security Council vote on Monday on a resolution to impose sanctions on North Korea, Kyodo news agency reported from New York, quoting U.N. sources.

"The big picture continues to depend on the geopolitical situation, the moves of the dollar and the oil price," said Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus.

In other precious metals, platinum dropped to $1,219/1,225 an ounce from $1,228/1,233 in New York. Palladium fell to $314/320 an ounce from $321/326.

Silver was down at $11.14/11.24 an ounce from $11.29/11.39.