Gold rose for an eighth consecutive session on Tuesday, its longest winning streak in almost a year, on hopes the U.S. Federal Reserve may launch more measures to stimulate the world's largest economy.
Bullion, which has added about 3 percent in eight sessions, also drew support from the debt crisis in Europe with initial euphoria over a victory for pro-bailout parties in Greece giving way to persistent concerns over Spain and its banking sector.
Gold hit an intraday high of $1,630.59 an ounce and was steady at $1,628.76 an ounce by 0603 GMT. Gold rallied to a record of around $1,920 in 2011, when investors turned to the metal as a safe haven during the debt crisis in Europe.
"Ahead of the FOMC meeting, gold bugs will watch for signs of more quantitative easing or an extension of Operation Twist when it ends this month," said Lynette Tan, an analyst with Phillip Futures in Singapore.
"A failure to confirm more asset purchase or the like could see gold dropping again. For the moment, we expect policy decisions from the Fed to influence gold price more than risk appetite linked to the euro crisis."
Previous rounds of asset purchases by the Fed to drive down interest rates and stimulate the economy had weakened the U.S. dollar, boosted global stock markets and burnished gold's appeal as a hedge against inflation.
The Federal Open Market Committee (FOMC) releases a policy statement at the end of its two-day meeting on Wednesday. The Fed's current "Operation Twist" programme, which involves buying long-term debt and funding the purchase by selling short-term notes, is scheduled to expire at the end of June.
U.S. gold for August delivery added $2.70 an ounce to $1,629.70 an ounce.
The Fed appears increasingly likely to offer more monetary stimulus despite political opposition, internal reticence and concerns about whether it will be effective, economists say.
Gold jumped to its highest level in 2012 around $1,790 in February after the Fed at the time said it would keep interest rates near zero until at least the end of 2014. But prices have shed about 9 percent since then on no signs of further easing.
The euro recouped some losses sustained after Spain's borrowing costs spiked to euro-era highs, but gains were capped ahead of a debt sale which is likely to see Madrid's borrowing costs rise even more.
Under pressure from financial markets and anxious world leaders, Europe agreed on Monday to move towards a more integrated banking system to stem a debt crisis that threatens the survival of the euro.
At a Group of 20 summit of the world's leading industrialized and developing economies in Mexico, Germany and its big euro zone partners took the unusual step of spelling out in detail measures to complete the economic and monetary union they launched to great fanfare 13 years ago.
Trading was lacklustre in the physical market due to wild swings in spot prices, but there was a bit of selling of gold scraps from Thailand, dealers said.
"The price keeps changing, so that has discouraged customers from coming into the market. One moment it's down, and then it's up again," a dealer in Singapore said.
Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust
Precious metals prices 0603 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1628.76 0.82 +0.05 4.15
Spot Silver 28.77 0.06 +0.21 3.90
Spot Platinum 1483.25 7.95 +0.54 6.48
Spot Palladium 626.00 -1.08 -0.17 -4.06
COMEX GOLD AUG2 1629.70 2.70 +0.17 4.01 8312
COMEX SILVER JUL2 28.74 0.06 +0.22 2.94 1765
Euro/Dollar 1.2607
Dollar/Yen 78.98
COMEX gold and silver contracts show the most active months
(Editing by Himani Sarkar)
