Precious metals edged lower in thin trading, with most Asian traders absent due to the Lunar New Year holiday and U.S. markets also shut.

Gold fell 0.9%, still trading near the $5,000 per ounce level. On Friday, the metal had climbed 2.4% after a modest rise in U.S. January consumer price data eased concerns about a sharp acceleration in inflation.

The inflation figures reinforced expectations that the Federal Reserve may cut interest rates, which typically supports non-yielding precious metals.

"Markets are still in a phase of rebalancing long and short positions, lacking a clear catalyst to break out of the current range," said Wu Diling, a strategist at Pepperstone Group. "Gold has repeatedly failed to break above $5,100, with profit-taking at higher levels creating selling pressure."

Trading liquidity in Asian hours was lower than usual as Chinese markets were closed for the Lunar New Year holiday.

In recent months, retail demand for precious metals in mainland China has been exceptionally strong, prompting authorities in the retail hub of Shenzhen to issue stern warnings against "illegal gold trading activities." These include trading apps offering leverage to retail investors and live-streamed gold sales.

Meanwhile, conditions in China’s silver market remain extremely tight, although there are early signs of moderation.

Silver inventories at the Shanghai Gold Exchange and Shanghai Futures Exchange are at historic lows. The price of silver futures nearing delivery is significantly higher than longer-dated contracts, creating a rare inversion of the typically upward-sloping futures curve.

"Speculative fervor on the Shanghai Futures Exchange has shown initial signs of cooling," wrote Mark Lofelt, a precious metals trader at Heraeus, in a Monday note.

He added that exchange rule adjustments, aimed at limiting the pace of inventory outflows, should help ease domestic supply tightness.

Lofelt noted that silver’s rapid price gains have squeezed its use in solar panels—one of the key drivers of industrial demand growth over the past decade—as manufacturers seek alternatives or reduce usage of the expensive metal.

This suggests that silver prices in the medium term will depend more heavily on investor sentiment and capital flows, he said.

As of 12:18 London time, spot gold was down 0.9% at $4,996.55 per ounce, while silver fell 0.9% to $76.73 per ounce. Platinum declined, while palladium saw a slight increase. The Bloomberg Dollar Index rose 0.1%.