Precious metals struck back in late European trade on Tuesday, with gold rising 2.4 percent and silver jumping by more than five percent on renewed buying by investors, dealers said.
After tumbling last week, the market bounced despite a rise in the dollar against the euro. The buying spree lifted palladium prices by nearly six percent, while platinum posted strong gains.
"We saw a correction and nothing more. The weaker longs got out and the market is resuming its upward path," said Peter Hillyard, head of metals sales at ANZ Investment Bank.
"And that upward path would take the gold market through $700 an ounce and probably to $800. I don't think there will be any further correction before we reach $700."
Gold hit a high of $671.20 an ounce and was quoted at $670.60/671.40 by 1437 GMT, against $655.60/656.40 late in New York on Monday. It hit a 26-year high of $730 on May 12.
John Meyer, analyst at Numis Securities, said the recent sell-off was a result of profit-taking and technical adjustments and the market saw the move as a healthy correction.
Gold sank nearly 10 percent last week and fell as low as $636.20 an ounce on Monday, its lowest since April 28, as a strong dollar sparked heavy selling.
"While the correction phase may not be over yet, we think it is too early to conclude that gold's bull trend is over," Barclays Capital said in a report.
"There is scope to test $850 later in the year as the combination of high oil costs, inflation, negative dollar sentiment and geo-political tensions will draw increasing volumes of investment interest towards gold's safe-haven properties," said James Moore of TheBullionDesk.com.
Gold typically has a negative correlation to the dollar because investors use the metal as an alternative currency.
In industry news, global gold demand fell 16 percent to 835.7 tonnes in the first quarter of 2006 from the corresponding period of 2005, as high prices dented purchases from the jewellery sector, World Gold Council said.
In other precious metals, platinum rose to as high as $1,313/1,323 an ounce from $1,279/1,285 in New York. The metal had fallen to a low of $1,270 on Monday.
Palladium jumped to $356/361 an ounce, compared with $336/342 in the US market and last week's 6-week low of $330.
Silver rose as high as $13.11 an ounce before dropping to $13.07/13.17, versus $12.46/12.56 in New York on Monday, when it hit a four-week low of $11.90.
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