Gold for February delivery was last up $1.80 at $611.20 an ounce. The contract closed higher in New York Mercantile Exchange action on Monday, after losing about 5% of its value last week, when it was swept up in a broad wave of selling in the commodities sector.

"The gold market took a hammering last week, primarily on U.S. fund selling, which appeared after the Asian and European hours of business on Friday," said Julian Phillips, an analyst at GoldForecaster.com.

"But in Asian and European hours the gold price started to bob back like a cork released under water," he said in e-mailed commentary.

"Demand from physical and investment sources will continue to do this while the funds are following the dollar and oil prices," he said, adding: "watch out for a change of direction by the funds."