Gold recovered 0.5 per cent or $2.90 in the end of last week but the chances of further weakening of dollar has cast a shadow on its future price.
Traders are hoping that the yellow metal will hit the downward psychological barrier of $625 so that they can book their orders.
Underpinned by a rally in crude oil prices and concerns about inflation, gold price ended higher on Friday at $653 an ounce.US oil futures ended up more than $1 at $70.68 a barrel.
However, over the month, gold has seen a decline of 2 per cent, the second straight monthly loss on weaker investment demand. One group of traders are doubtful of gold's recovery in the second half as the yellow metal needs to regain investors' faith.
Gold is generally seen as a hedge against inflation.
There is absolutely no reason as to why gold prices would move up, said Prithviraj Kothari, director Riddhi Siddhi Bullion. The metal was going up for five years at a stretch without any valid reason. Now, the metal has to cool down as the bulls are taking it easy, Kothari added. Domestic market follows the trend in the US and London.
Though gold and silver appeared to lure investors because of weakening dollar against euro.
Another school of thought feels that the recovery will continue.
An analyst with one of the large bullion trading house said that the upward movement would end soon as the fundamentals are still weak for the yellow metal. Only lack of strength of the dollar cannot lead to rise in the price for too long, he added.
Gold generally moves in the opposite direction of the dollar, which on Friday dropped the most against the euro in a week. The dollar was also lowest against six major currencies.
Silver futures for September delivery rose or 0.6 per cent or 8 cents, to $12.585 an ounce on the Comex.
Till Thursday, however, the price had fallen 3.3 per cent this year. The metal is down 6.6 per cent this month. The dollar fell on speculation that the Federal Reserve would not raise interest rates. Fed officials have kept rates unchanged at 5.25 per cent since June 2006.
Meanwhile, five of the past six bear markets for the US currency have led to a higher gold price. Before this year, the metal has more than doubled in price in six straight annual gains. The dollar index has dropped about 24 per cent during the same time.
Meanwhile, Indian gold exporters to the US are passing through terrible time because they have been denied the extension of the Generalised System of Preferences, which would add to 6 per cent extra cost to them.
