Gold rallied more than 1 percent and silver jumped over 2 percent on Tuesday as investors returned in the new year with a renewed appetite for riskier assets such as commodities, although global economic worries still weighed on sentiment. Better-than-expected manufacturing data from China fuelled interest among investors who had moved to the sidelines because of year-end credit tightness. A weaker dollar also helped fuel gains in commodities.
"Everyone is a bit more optimistic at the beginning of the year," said Ong Yi Ling, an analyst at Phillip Futures. Gold could drop below $1,500 in the first quarter of 2012 and is unlikely to test its record high hit last September until later 2012, a Reuters poll showed.
Spot gold rose as much as 1.5 percent to $1,589.65 an ounce and eased slightly to $1,588.29 by 0724 GMT, rebounding from a 10-percent loss in December. The most-active US gold futures contract rallied 1.5 percent to $1,589.50. Technical analysis suggested spot gold could rise towards $1,629 an ounce during the day, said Reuters market analyst Wang Tao. Cash silver gained 2.2 percent to $28.41, leading the rally in the precious metals complex. US silver rose 1.8 percent to $28.41.