Spot gold held steady on Monday as healthy physical demand helped buoy prices, while China's move to further tighten its monetary policy and upbeat  US economic data weighed on sentiment.

China raised banks' reserve requirement ratio on Friday,  as the country's inflation soared to a 28-month high in  November and put pressure on the government to step up efforts  to curb inflation.

"There's the possibility that China would tighten its  policy further," said Ong Yi Ling, an analyst at Philip  Futures. "It could affect demand for commodities, and gold  could be caught in a sell-off.”

The dollar edged higher against a basket of currencies,  supported by higher Treasury yields after improving US data  late last week.

A rise in US consumer confidence to its highest in six  months and a much bigger-than-expected contraction in the  country's trade deficit pointed to a firmer economic recovery   on Friday.

Spot gold gained by 0.2 per cent to $1,385.29 an  ounce by 0304 GMT, after falling by 2.2 per cent last week.

US gold futures edged up 0.1 per cent to $1,386.6  an ounce.

Spot gold is biased to fall even though it is  rangebound between $1,371 to $1,395 per ounce, said Wang Tao,  a Reuters market analyst.

Robust physical demand in the region helped support  prices, dealers said.

"The physical market is very good. Bullion traders and  some jewellers are buying, as well as some individual  customers who prefer to sell currency and buy gold," said  Peter Fung, head of dealing department at Wing Fung Precious  Metals in Hong Kong.

India and China have both shown strong appetite, due to  seasonal rise in demand, he added.

Investors are eyeing a Federal Reserve meeting on Tuesday  to see whether the proposed $600 billion stimulus plan would  be carried out, or if further stimulus would be considered to  jump-start the economy.

"If the Fed hints further QE (quantitative easing), it  would provide some bullish support to gold," said Ong of  Philip Futures.

"On the longer term, some investors could be buying on  dips, which also provides support to prices.”

Platinum group metals rose more than one per cent,  following strength in the industrial metals complex.

Spot platinum rose one per cent to $1,682.99 an  ounce, and palladium gained more than one per cent to  $736.97.

Three-month copper on the London Metal Exchange  gained more than one per cent, while LME zinc rose more than  two per cent. – Reuters