By Frank Tang and Clara Denina
NEW YORK/LONDON (Reuters) - Gold climbed nearly 1 percent on Tuesday, briefly breaking above $1,200 an ounce, as the dollar fell against the euro due partly to better-than-expected German investor sentiment data.
Bullion investors largely ignored an unexpected rise in U.S. producer prices in October, which showed an underlying trend that continued to point toward an environment that could bolster the Federal Reserve's resolve to maintain very low interest rates a bit longer.
Meanwhile, some market participants said gold should benefit as funds began to look for relatively cheaper assets before the year ends.
"When we start to get closer to the end of the year, a lot of investors are starting to look for investments that are undervalued, and gold at below $1,200 looks quite attractive," said Phillip Streible, senior commodities broker at RJO Futures in Chicago.
Spot gold was up 0.7 percent at $1,195.06 an ounce by 2:42 p.m. EST (1942 GMT) after earlier reaching its highest since Oct. 30 at $1,204.70.
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U.S. COMEX gold futures for December delivery settled up $13.60 at $1,197.10.
The metal has rebounded around 6 percent from a 4-1/2-year low of $1,131.85 hit on Nov. 7.
The dollar slipped 0.4 percent against a basket of major currencies, mostly due to a stronger euro after the ZEW survey showed German economic sentiment rose in November for the first time in almost a year, beating expectations and raising hopes of an improvement in Europe's biggest economy.
A weaker greenback makes dollar-denominated gold less expensive for holders of other currencies.
Markets were awaiting minutes of the Federal Reserve's October meeting, to be released on Wednesday.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.33 percent to 723.01 tonnes on Monday, the first increase since Nov. 3.
Elsewhere, RBI is in talks with the government to increase curbs on gold imports and an announcement could come as early as Tuesday, a finance ministry source said.
More restrictions could hit demand from India and add pressure on gold prices.
Among other precious metals, platinum rose 0.5 percent to $1,199.85 an ounce, while palladium climbed 0.5 percent to $771.22 an ounce. Silver was up 0.3 percent at $16.14 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Michael Urquhart and Richard Chang)