What? Gold headed for worst fall in 30 years?

London: Gold rose back above $1,570 an ounce on Thursday as expectations of an Irish vote in favour of Europe's fiscal pact lifted the euro, but this month's sharp drop in the single currency kept the metal on track for its worst May performance in 30 years.

Concerns over Spain's banking system, a surge in Italian borrowing costs and Greek elections that may determine whether it stays in the euro zone have sent investors fleeing to the safety of the dollar this month.

As well as being caught in the broader market sell-off, gold is particularly sensitive to gains in the dollar, which can dent gold's appeal as an alternative asset.

[caption id="attachment_327863" align="alignleft" width="380" caption="Gold is down more than 6 per cent so far this month, its biggest May loss since a near 10 per cent fall in 1982. Reuters"][/caption]

Spot gold was up 0.5 percent at $1,570.20 an ounce during trade, while US gold futures for August delivery were up $5.60 an ounce at $1,571.30.

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The precious metal is down more than 6 percent so far this month, its biggest May loss since a near 10 percent fall in 1982. The metal is also set to post a fourth consecutive monthly loss for the first time since January 2000.

While the possibility of a fresh round of monetary easing in the United States and demand for alternatives to the beleaguered euro could lift gold, confidence in the metal remains weak.

"If we had momentum upwards, there are still plenty of people who are bullish and who would buy into that, but at the moment, you have pressure from a strong dollar, or perhaps more accurately a weak euro, and people are just a little bit wary," Mitsui Precious Metals analyst David Jollie said.

"If you are looking to make a profit, and you think it will be $20 lower on Friday, there's just no reason to buy it today."

"That doesn't alter the fact that there are plenty of bulls out there. They are waiting for a trigger to send the price higher, and the question is, what's that trigger?" he added. "It could be quantitative easing; it could be a short period of euro stability; it could be the Greek elections."

Expectations of Ireland voting to support Europe's fiscal pact helped lift the euro from a near two-year low against the dollar on Thursday, taking some downward pressure off gold. The single currency remains vulnerable, however.

The euro is set for its biggest monthly fall in at least eight months, with some analysts expecting it to drop towards $1.20 in coming weeks as the eurozone's debt crisis deepens.

Expectations that Spain may eventually need outside help to keep its banks afloat kept its government bond yields close to euro-era highs, while safe-haven German bond prices held near record highs.

Reuters