Gold backed away on Monday as some investors booked profits from a rally to a two-week high and a lower oil price added to selling pressure, dealers said.
Gold still attracted as a port in a storm following the attempted attack on an oil facility in Saudi Arabia on Friday, and the metal was expected to gain in the long term, they said.
"The market has drifted lower after the spike higher on Friday and it should be well supported at current levels," said Yingxi Yu, precious metals analyst at Barclays Capital.
"The attack on Saudi Arabia last Friday will serve to exacerbate geopolitical concerns and make people nervous about holding aggressive short positions at present."
Gold fell to $555.40/556.10 an ounce by 1028 GMT after rising as high as $558.75, compared with $558.60/559.50 in New York late on Friday when it rose almost 2 percent.
Oil prices fell more than 1 percent after surging last week on the al Qaeda attack on the world's biggest oil processing plant in Saudi Arabia.
Saudi forces on Monday killed five suspected militants believed to be linked to the attack, the interior ministry said. "Some profit taking has emerged overnight as oil prices soften but the current backdrop of geo-political tensions and nervous currency/energy markets are likely to draw investors towards more traditionally safe-haven assets such as gold," said James Moore of TheBullionDesk.com.
Gold has been trading between a 25-year high of $574.60 an ounce hit on Feb. 2 and a 5-week low of $534.50 posted on Feb. 14. Analysts said gold has not shown a clear trend after falling from its recent peak but the long-term sentiment was bullish. "The forward curve continues to be in contango ... implying that markets continue to expect stronger future gold prices," John Meyer, analyst at Numis Securities, said in a report. A market is said to be in contango when front-month contracts are cheaper than later delivery contracts.
"The market continues to hold in the middle of the $535-$575 range that has held since early January, with the most recent price action suggesting a bias towards a move higher, rather than lower, within this trading band," Alan Williamson, head of commodity research at HBC Bank, said in a daily note.