On Monday gold increased by 0.5% as investors decided to benefit from the lowered prices while expecting the euro to further advance against the US dollar.

Spot gold was quoted at $1,494.59 an ounce at 1138 GMT compared to $1,485.80 late in New York on Friday. U.S. gold futures for August delivery rose $12.60 an ounce to $1,495.20.

Greece last week approved austerity measures needed for it to access another tranche of funding from the European Union and IMF, sparking a relief rally in some assets seen as higher risk, and weighing on gold.

But fears that the euro zone debt crisis may have longer to run have sparked bargain hunting on Monday.

"Market players are using the opportunity to get into gold at a cheap price after the sharp fall last Friday," said Commerzbank analyst Daniel Briesemann.

"The debt crisis in Greece has eased somewhat for the time being, but that does not mean it is solved. The problem is still there -- the EU and Greece have only gained some time."

Gold has seen some physical buying returning, especially in the major Asian markets, after its dip below $1,500 an ounce, but this demand has been muted by seasonal factors. Summer is typically a quiet time for gold buying.

"The seasonality of physical demand suggests that gold won't be able to rely on the same depth of physical interest in July as it could in January," said UBS in a note.

"We do expect physical buyers to react to lower prices, but don't expect strong interest until prices get below $1,480 - as they did briefly on Friday, when our physical sales to India picked up to above-average levels."