Gold (GC-FT1,121.90-0.20-0.02%) hit a one-month high on Monday as the U.S. dollar came under pressure from easing fears over potential U.S. rate hikes, and as talk of a bailout for debt-ridden Greece underpinned the euro.
Investors have in recent weeks poured money into gold as a hedge against currency volatility, while the metal's steady rebound since falling below $1,100 (U.S.) has also ignited technical buying and boosted sentiment.
Spot gold hit an intraday high of $1,130.65 an ounce and was quoted at $1,121.25 by 1055 GMT, up from $1,117.50 at New York's notional close on Friday.
U.S. gold futures also struck a 1-month high, silver gained more than 1 per cent, while platinum (PL-FT1,539.70-3.90-0.25%) and palladium (PA-FT444.001.650.37%) tracked bullion higher.
“There's a bit of risk coming back into the market, we shook off the change in U.S. discount rates and the nervousness disappeared fairly quickly after that. $1,100 is a level being looked at, if we can hold it there could be further gains to be made as news from Greece unfolds,” said Ole Hanson, analyst at Saxo Bank.
The dollar weakened on Monday as investors reassessed the chances of an earlier-than-expected interest rate hike by the Federal Reserve.
Currency markets took the Fed's surprise decision to raise its discount rate last week as a signal the U.S. central bank was coming closer to tightening its benchmark rate. But a benign U.S. inflation reading on Friday caused markets reassess that view.
Also limiting the dollar's gains versus the euro were reports that Germany had prepared plans for aid worth between 20 billion and €25-billion for debt-laden Greece.
Falls in the dollar tend to benefit gold as the metal is traditionally seen as an alternative asset to the U.S. currency. More recently, however, gold has been bought as a hedge against volatility in general.
Volatile
Investors await Fed Chairman Ben Bernanke's twice-yearly testimony to Congress and the Senate on Wednesday and Thursday for further clues on rate policy.
“Markets are set to remain volatile in the week ahead due to the line-up of economic data and in particular Friday's GDP reading as players look for sign of continued growth as the Fed begins to reign in its emergency measures,” said James Moore, analyst at TheBullionDesk.com.
Bullion was about 8 per cent below a lifetime high above $1,200 an ounce struck in early December and was moving away from a three-month low around $1,043 hit almost three weeks ago.
U.S. gold futures for April delivery rose $0.3 an ounce to $1,122.40 an ounce. They had hit an intraday high of $1,131.50 on Monday, its strongest in a month.
Gold priced in euros held near last week's record around €830.
Oil rose to a six-week high above $80 a barrel on Monday, extending the previous session's gains and boosting the appeal of gold as a hedge against oil-led inflation.
In other precious metals, silver (SI-FT16.39-0.03-0.17%) was at $16.40 an ounce versus $16.27, platinum (PL-FT1,539.70-3.90-0.25%) was at $1,536.50 versus $1,530 and palladium (PA-FT444.001.650.37%) was at $440 versus $437.
“Silver has finally started to move and that's helping gold as well. Silver outperforms (gold) in both directions. Over the last couple of days we've see silver outperform gold by 3 per cent – could be an indication that risk appetite is returning to metals,” Saxo Bank's Mr. Hanson said.
