Gold ticked up on Tuesday after the euro rebounded, while bullion prices headed for their biggest monthly rise since August as lingering concerns about growth in the United States prompted buying from investors.
Gold jumped nearly 5% last week, its fourth consecutive weekly gain, after the US Federal Reserve pledged to keep interest rates near zero until at least late 2014, which could put pressure on the dollar.
Gold added $7.45 an ounce to $1,736.09 an ounce by 0656 GMT, having hit a low around $1,716 on Monday.
"Although charts look exhausted, US dollar weakness and recent Fed activity seems to be giving fundamental boost for gold to stay above $1,710," said Pradeep Unni, senior analyst at Richcomm Global Services.
"Steady prices have triggered buying interest."
A top US Federal Reserve official on Monday said he would have preferred a more optimistic statement on the US economy, after the central bank last week painted a grim picture of the recovery and forecast ultra-low interest rates until late 2014, considerably later than investors had expected.
More From This Section
Gold, which struck a record at $1,920.30 last September, was headed for an 11% rise this month, highest since a 12% gain in August 2011.
"Sentiment seems to have improved quite tremendously, I would say. We are now into more bullish territory, more than ever, with the Fed providing enough fundamental support," said Dominic Schnider, head of commodity research at UBS Wealth Management.
"I think we have good reasons to believe we are going to test $1,805 in the coming day. The Fed was clearly the most important event," said Schnider.
Gold has gained for the last four consecutive weeks, with a spike in prices before the Lunar New Year holidays being driven partly by Chinese buying.
"Before the Chinese New Year really started, we've seen quite strong gold exports from Hong Kong to China. Apparently Chinese demand was very solid," said Schnider.
US February gold rose $5.60 to $1,736.60 an ounce.
In other markets, the euro rose on hopes for a Greek debt restructuring deal that would help the country avoid a disorderly default, possibly setting itself up for a test of a key chart level.
Greece and its private creditors realise the need to avert a financial collapse of the country and are close to a deal on restructuring Greek sovereign debt, Luxembourg Finance Minister Luc Frieden said on Tuesday.
Gold, typically a safe-haven asset, has been tracking the fortunes of the euro and stocks, with speculators selling the metal for cash to cover losses in other markets, especially during this period of uncertainty in Europe.
The physical sector lacked activity, but jewellers could eventually return to the market before prices rose further.
"I think selling has ceased since last evening, but volume was thin. Customers were all eager to see how low the price would go, and now they are preparing to buy back," said a dealer in Singapore.
"The Indonesians are still sending gold scraps, but the volume has dropped."
Silver added 0.48% to trade at $33.62 an ounce after rising to $33.95 on Monday, its strongest since mid-November. Platinum and palladium also firmed.
Holdings of the world's largest silver-backed exchange-traded fund, iShares Silver Trust rose about 1% to 9,608.95 tonnes by Monday, from 9,510.70 tonnes on Friday.