Gold ticked up on Tuesday after the euro recouped some losses, while bullion prices headed for their biggest monthly rise since August as lingering concerns about growth in the United States prompted buying from investors.
Gold jumped nearly 5 percent last week, its fourth consecutive weekly gain, after the US Federal Reserve pledged to keep interest rates near zero until at least late 2014, which could put pressure on the dollar.
"Sentiment seems to have improved quite tremendously, I would say. We are now into more bullish territory, more than ever, with the Fed providing enough fundamental support," said
Dominic Schnider, head of commodity research at UBS Wealth Management.
Gold added $7.05 an ounce to $1,735.69 by 0315 GMT, having hit a low around $1,716 on Monday.
"I think we have good reasons to believe we are going to test $1,805 in the coming day. The Fed was clearly the most important event," said Schnider.
US February gold rose $5.1 to $1,736.10 an ounce.
A top US Federal Reserve official on Monday said he would have preferred a more optimistic statement on the US economy, after the central bank last week painted a grim picture of the recovery and forecast ultra-low interest rates until late 2014.
Gold, which struck a record at $1,920.30 last September, was headed for an almost 11 percent rise this month, highest since a 12 percent gain in August 2011. A spike in prices before the Lunar New Year holidays was driven partly by Chinese buying.
"Before the Chinese New Year really started, we've seen quite strong gold exports from Hong Kong to China. Apparently Chinese demand was very solid," said Schnider.
In other markets, shares and the euro recovered earlier losses on Tuesday after Greek Prime Minister Lucas Papademos raised hopes for a deal to be reached this week to avoid a default, but markets were starting to worry that Portugal might need a second rescue.
At a summit meeting on Monday, European leaders agreed on a permanent rescue fund for the euro zone and most endorsed a German-inspired stricter budget discipline, but they fell short of reconciling fiscal austerity with growth.
Gold, typically a safe-haven asset, has been tracking the fortunes of the euro and stocks, with speculators selling the metal for cash to cover losses in other markets, especially during this period of uncertainty in Europe.
The physical sector lacked activity, but jewellers could eventually return to the market before prices rose further.
"I think selling has ceased since last evening, but volume was thin. Customers were all eager to see how low the price would go, and now they are preparing to buy back," said a dealer in Singapore. "The Indonesians are still sending gold scraps, but the volume has dropped."
Silver added 0.36 percent to $33.58 after rising to $33.95 on Monday, its strongest since mid-November. Platinum and palladium also firmed.
Holdings of the world's largest silver-backed exchange-traded fund, iShares Silver Trust rose about percent to 9,608.95 tonnes by Monday, from 9,510.70 tonnes on Friday.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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