Gold rose on Monday after oil producers failed to agree on an output freeze, sending crude prices and equities tumbling and stocking safe haven demand for bullion. A deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.
US crude futures slid as much as 6.8 per cent to $37.61 a barrel, while Brent futures dropped 7 per cent to $40.10 a barrel. Asian shares fell, dragged down by the drop in crude oil futures, while the safe-haven yen soared. Spot gold rose to a session high of $1,239.30 an ounce, before giving up gains to trade flat at $1,234 by 0256 GMT.
"There is a little bit of safe haven buying. But there are concerns about (US) interest rate hikes. That tug of war is keeping prices in range,” said Ronald Leung, chief dealer, Lee Cheong Gold Dealers, Hong Kong.
Physical demand is soft and is unable to support rallies, he said.
Gold prices have steadied after posting their biggest quarterly rise in nearly 30 years in the three months to March on scaled-back expectations that the US Federal Reserve will push ahead with several rate hikes this year.
Since its initial rate hike in December, the Fed has slowed its expected pace of subsequent increases in response to risks that a slowdown in the global economy could be more severe than expected.
Markets are pricing in only one rate hike this year. But recent upbeat economic data and hawkish comments from Fed officials have kept investors on edge.
The Fed is unlikely to raise US interest rates when it meets later this month but seems to be on track for at least two increases over the rest of the year, Chicago Fed President Charles Evans said on Friday. Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 5.64 tonnes to 812.46 tonnes on Friday, the first increase in a week.
Hedge funds and money managers raised their bullish bets on gold and silver in the week to April 12, US Commodity Futures Trading Commission data showed on Friday.
The higher gold prices this year have kept a lid on physical demand in key markets, India and China.