NEW YORK/LONDON: Gold rose 2 percent on Monday to above $1,700 an ounce, on track for its biggest one-day gain in three weeks, swept higher by a wave of economic optimism on hopes that new proposals may emerge out of Europe to tackle the region's debt crisis.
The metal, a traditional safe haven that has recently tracked riskier assets, rose in tandem with equities after Germany and France outlined plans for a fiscal union, stepping up a drive for coercive powers to reject euro zone members' budgets that breach EU rules.
Bullion also benefits as Wall Street, commodities and crude oil broadly soared while the dollar fell. The 25-day correlation-log between gold and the S&P 500 rose above a positive 0.5, its tightest link in six months.
Meanwhile, some analysts said that gold could be vulnerable to future sell-offs as it has appeared to lose its safe-haven investment appeal amid economic uncertainty. A poor technical outlook could also limit bullion's gains.
"With the continued dollar strength, or a possible bounce in equities that makes gold ownership less immediately 'needed', we could target a down-move to below $1,620," said Rick Bensignor, chief market strategist of Merlin Securities.
Spot gold rose 1.9 percent to $1,710.80 an ounce by 11:38 a.m. EST (1638 GMT).
Earlier in the session, gold touched a one-week high at $1,719.89 an ounce, near its 100-day moving average -- a key technical support it breached early last week.
US December gold futures were up $26.40 at $1,712.10 an ounce. Volume was in line to exceed its 30-day average, preliminary Reuters data showed, consistent with its recent improved turnover.
Spot silver tracked gold to rise 3.4 percent to $32.09 an ounce. Platinum rose 1.2 percent to $1,543.75 an ounce, while palladium rose 3.5 percent to $581.72 an ounce.
Although gold is regarded as a safe haven asset to shield investors in times of uncertainty, it has increasingly become prone to pressure from selling in the wider financial markets as investor sentiment remains fragile.
"In the short-term gold is not acting any differently from commodities or equities. And where we go from here depends on what solutions we get (for the euro zone crisis)," Matthew Turner, analyst at Mitsubishi said.
Investors are also likely to closely watch a meeting by euro zone ministers on Tuesday, as detailed operational rules for the region's bailout fund await approval. Approval would pave the way for the 440 billion euro facility to draw cash from investors.
Gold, which hit a record $1,920.30 in September, is up more than 20 percent year to date, but is trading nearly flat so far in November.
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