Gold jumped above $1,700 an ounce on Monday due to early gains in the euro and hopes that Europe will take bolder steps to resolve a crippling debt crisis, while a recovery in equities also prompted buying from a few investors. Gold held on to its 1 percent gain even after the International Monetary Fund said it was not in discussions with Italian authorities on a financing plan, dousing speculation that it was preparing an aid package.
Spot gold added $25.44 an ounce to $1,704.59 an ounce by 0710 GMT - its biggest daily gain in more than 2 weeks. Gold was still below a lifetime high of around $1,920 touched in September. Sentiment has improved, said Dick Poon, manager of precious metals at Heraeus in Hong Kong, but the outlook for bullion depends on how Europe resolves the debt crisis and the economic situation in the United States.
"Everybody still tries to keep more cash on hand," said Poon. US gold futures rose $20.5 an ounce to $1,706.2 an ounce. Other precious metals tracked gold higher, with silver rising more than 2 percent, palladium up more than 3 percent and platinum gaining nearly 2 percent.
Gold tumbled to its weakest in nearly a month last week after declines in equities blamed on the debt crisis in Europe prompted investors to cash in on bullion to cover losses. But a rebound in equities helped restore gold's appeal, while strong retail sales in the United States over the Thanksgiving sale season offered investors some respite. Also underpinning investor sentiment was news that central banks bought nearly 26 tonnes of gold in October, boosted by a purchase of almost 20 tonnes by Russia as well as buying from Mexico, Belarus and Colombia, data from the IMF showed.
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