LONDON: Gold edged down on Monday as the dollar recovered losses made after a disappointing US jobs report eased concerns about an early interest rate increase, but lower European shares and uncertainty over Ukraine limited the downside.

Spot gold was down 0.2 per cent at $1,266.40 an ounce by 0956 GMT. It fell to a near three-month low of $1,256.90 on Friday before gaining support from data showing US employers hired the fewest number of workers in eight months in August.

The jobs market is seen as a leading indicator of the Federal Reserve’s rates policy in coming months after the end of the bond purchases expected in October.

Gold has benefited from low interest rates in the years after the credit crisis, as this encouraged investors to put money into the non-interest-bearing assets.

“Gold still struggled to close above $1,270 on Friday which suggests to me that surely speculators, on the modest dollar pull back, did not pile massively back into gold,” VTB Capital analyst Andrey Kryuchenkov said.

“The weaker jobs report did not wobble the dollar significancy ... financial players and investors in the West stopped buying into gold some time ago and it’s still difficult to see them get back into the market when you have much better returns elsewhere.” The dollar rose 0.3 per cent against a basket of leading currencies, while European equities dropped after an opinion poll showed supporters of Scottish independence from Britain taking the lead for the first time since the referendum campaign began.

Traders said developments in Ukraine were being watched to see if the ceasefire agreed with the pro-Russian rebels would hold up.

Any worsening of the crisis, which has caused the sharpest confrontation between Russia and the West since the Cold War, could boost gold as it is seen as an insurance policy during times of political and financial uncertainties.

For now, the strength in the dollar is seen souring demand for bullion. Hedge funds and money managers decreased their bullish futures and option bets in gold for a third consecutive week to the lowest since June, the Commodity Futures Trading Commission said on Friday.

Physical demand picked up last week as gold fell to a near three-month low, but volumes were thin as markets in China, the top buyer of bullion, were closed for a holiday.

Platinum rose 0.5 per cent to $1,407.25 an ounce, and palladium gained 0.6 per cent to $890.20 an ounce.

Spot silver rose 0.3 per cent to $19.17 an ounce.