Gold inched down on Monday, extending losses to a third session, on a lack of conviction the U.S. Federal Reserve would take measures to stimulate the economy anytime soon even after a disappointing jobs report.
U.S. non-farm payrolls increased by just 80,000 in June, lower than a forecast of 90,000, raising pressure on the Fed to do more to help the frail recovery.
"The market is not sure where prices should go and the sentiment is fragile," said Lynette Tan, an analyst at Phillip Futures, adding that prices are likely to remain rangebound for the time being with investors stuck in data-watching mode.
Though June's payrolls increase fell short of expectation, it still exceeded the May number and could be seen as a slight improvement, putting a damper on hopes for a third round of quantitative easing from the Fed, Tan added.
On June 1 gold jumped 4 percent at a surprisingly weak employment report which fuelled talks of further monetary easing from the Fed. The central bank's stance on easing has played a major role in the gold market this year.
Spot gold dropped to its lowest in almost two weeks of $1,575.89 an ounce, before recovering slightly to $1,580.09 an ounce by 0346 GMT.
However, Reuters market analyst Wang Tao expects spot gold to fall to $1,540 an ounce during the day.
U.S. gold futures contract for August delivery was up 0.2 percent to $1,581.20.
The dollar and Treasuries trumped gold as top destinations for the flight to safety, as investors fretted about the global economic outlook with euro zone fighting its debt crisis and China showing signs of an economic slowdown.
China's annual consumer inflation in June cooled, giving Beijing more scope to ease monetary policy to support growth but potentially taking some heat off gold, a traditional hedge against inflation, in the world's upcoming biggest gold consumer.
Asia's physical gold market has been sluggish for a while, as the rangebound price moves did little to excite investors.
"India is not even responding to the stronger rupee," said a Singapore-based trader, "Physical supply seems high and scrap is coming into the market."
Hedge funds have also moved to the sidelines of the market as volatility <.GVX> drops, he added.
(Editing by Himani Sarkar)