By Frank Tang and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold prices rose to a three-week high on Monday, extending the previous session's gains as simmering tensions in Ukraine and a break above a key $1,300 an ounce technical level fuelled buying.
Dealers remained cautious on whether the gains can be sustained, however, as outflows from the top physical gold exchange-traded fund continued to indicate bearish sentiment.
Bullion's safe-haven appeal increased after news that a street battle between supporters and opponents of Russia in southern Ukraine over the weekend killed at least 42 people, including dozens of pro-Russian protesters incinerated in a burning building, bringing the country closer to war.
"The further escalation of the situation in Ukraine has prompted gold purchases, especially on the futures market," said Eugen Weinberg, head of commodity research at Commerzbank.
Global economic uncertainty after data showed a contraction in Chinese manufacturing that renewed concerns about a slowing economy in China also supported gold, and the market largely ignored a report showing upbeat U.S. service-sector activities.
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Spot gold was up 0.8 percent at $1,309.84 an ounce by 4:14 p.m. EDT (2014 GMT), having earlier risen to $1,315.80 earlier, its highest since April 15.
U.S. COMEX gold futures for June delivery settled up $6.40 an ounce at $1,309.30.
Trading volume was in line with its 30-day average, preliminary Reuters data showed, even though the London markets were shut for the May Day holiday.
Weakness in investment has pressured gold in recent weeks. The SPDR Gold Trust, the world's largest gold ETF, said its holdings fell 2.70 tonnes to 782.85 tonnes on Friday, bringing its outflow for the week to nearly 10 tonnes.
Among other precious metals, silver was up 0.7 percent at $19.59 an ounce.
Platinum group metals were underpinned after the world's top platinum producers said on Monday that striking South African miners were afraid to accept the companies' latest wage offer because of "threats to their personal safety".
Platinum rose 0.9 percent to $1,444.50 an ounce and palladium climbed 0.9 percent to $814.77 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy, Susan Thomas, Marguerita Choy and Diane Craft)