Gold prices steadied on Monday after posting their biggest one-day drop since mid-June in the previous session as investors took to the sidelines ahead of Tuesday's US presidential election.

The metal was kept under pressure by weakness in stock markets and gains in the dollar, as low-risk assets gained at the start of a week in which the United States votes in a new president.

The US elections will be closely watched by financial markets, with incumbent Barack Obama seen as more supportive of continued stimulus measures, while Republican challenger Mitt Romney is expected not to favour additional easing.

A Romney team sceptical of strong Federal Reserve stimulus would be unlikely to renominate Fed chief Ben Bernanke for a third term in 2014.

"Obama is supporting Bernanke, and is supporting monetary stimulus," Saxo Bank vice president Ole Hansen said.

"With a Romney win - he has been criticising the approach of the Fed - Bernanke will not be renewing his contract."

Spot gold was at $1,677.69 at 1131 GMT, up 0.08 per cent, having earlier touched a nine-week low of $1,672.24, while US gold futures for December rose $3.10 an ounce to $1,678.30.

Prices slid more than 2 per cent on Friday after better than expected US jobs data lifted the dollar and reduced pressure on the US authorities for a continuation of its ultra-loose monetary policy.

"US economic data has improved, and that has removed some of the driver for quantitative easing that we had previously," Hansen said.

Cash printing by central banks boosts gold's appeal by stoking concerns over inflation while keeping pressure on interest rates. The metal jumped to nearly $1,800 an ounce last month on central bank stimulus measures, but has since eased.

Ahead of Tuesday's vote, Obama and Romney crisscrossed the country in the closing stages of a campaign that polls show is deadlocked nationally.

In addition to monetary policy, the elections have implications for how the US will deal with its so-called fiscal cliff, when about $600 billion in government spending cuts and higher taxes are set to kick in from January 1.

"The outcome of a divided Congress, and in turn much back and forth disagreement surrounding the fiscal cliff and the debt ceiling, would be gold supportive," UBS said in a note.

CHINESE IMPORTS JUMP

Hong Kong's gold shipments to mainland China jumped 23 per cent on the year in September to 69.711 tonnes as demand picked up ahead of the holiday season. Net exports decreased 13 per cent on the year.

As China does not publish gold trade data, the numbers from Hong Kong - a main conduit for gold into China - help gauge China's gold trade. China is gearing up to overtake India as the world's top gold consumer this year.

Importers in India stocked up on gold in the week preceding key festivals as prices hovered near their lowest level in more than 10 weeks, helped by a weaker rupee.

The bullish money held by hedge funds and other big speculators in US commodities fell by $8 billion in the week to October 30 - the biggest weekly decline in nearly six months - after Hurricane Sandy's devastating hit on the US East Coast.

Gold saw an exit of $2 billion in managed money net longs, adding to the previous week's decline of $3.8 billion, data showed on Friday. This leaves plenty of scope for these positions to rise, analysts said.

"Given the price move on Friday, positioning is likely to have been scaled back even further, leaving a relatively clean market base ahead of the US elections," Barclays Capital said in a note.

Spot platinum gained 0.17 per cent to $1,539.69 and spot palladium fell 2.07 per cent to $596.38.

Silver was up 0.16 per cent at $30.83 an ounce. – Reuters