NEW YORK/LONDON: Gold rose on Wednesday after China vowed to continue to invest in euro zone government debt, increasing gold's appeal as a hedge against inflation fueled by easy monetary policies.
Bullion came off its early session highs as the dollar recovered losses versus the euro on news euro zone finance officials are looking to delay a second bailout program for Greece.
The metal rose as much as 1 percent after China's central bank governor said China and other emerging nations such as Brazil, Russia or India were waiting for the right time to help the euro bloc, but there were no concrete promises on fresh funding.
"For China to make a commitment like that is enough to give gold the psychological boost and to...increase the potential for inflating commodities and precious metals prices," said Jeffrey Sica, chief investment officer of SICA Wealth Management with more than $1 billion in assets.
Spot gold was up 0.5 percent at $1,727.04 an ounce by 1:23 p.m. EST (1823 GMT).
US COMEX gold futures for April delivery were up $11.70 at $1,729.40.
Gold broke ranks from the euro and US equities after initial rallies fizzled.
The metal, though viewed as a safe haven, has tracked the fortunes of riskier assets in the past few months, as market turbulence caused by the euro zone debt crisis forces investors to sell gold to cover losses elsewhere.
"The correlation between gold in the short term and some of the risk markets is higher than people probably expect," said Pau Morilla-Giner, head of equities, commodities & alternative investments at London and Capital Asset Management.
"Gold continues to trade about 60 to 70 percent of the time as an alternative currency, which clearly has to do with being a better store of value than nominal currencies that are being abused by excessive quantitative easing (QE) across the board," he added.
PAULSON UPBEAT ON GOLD ETF
Also boosting sentiment was news hedge fund manager and long-time gold bull John Paulson's firm continued to keep a significant stake in SPDR Gold Trust at the end of the fourth quarter, a US regulatory filing showed.
Paulson & Co cut his gold ETF bullion holdings by about $600 million in the fourth quarter, a second straight reduction that was probably driven by client redemption needs as he remained upbeat on the metal.
However, Paulson's selling in the SPDR Gold Trust was more than offset by buying by other investors, reflecting long-term confidence in gold.
Spot platinum was up 0.7 percent at $1,635 an ounce.
Silver was down 0.5 percent on the day at $33.38 an ounce, while palladium inched up 30 cents at $682.50.
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