Gold prices rose to their highest in nearly a week on Tuesday as the euro rallied 1 percent versus the dollar, with rising stock markets pointing to a sharper appetite for assets seen as higher risk at the US currency's expense. Spot gold was up 1.3 percent at $1,612.80 an ounce at 1500 GMT. Prices are within $10 of their 200-day moving average, a key technical level they fell through last week, which is just above $1,621 an ounce.
"The afternoon rally in risky assets and gold seems to have been spurred by better-than-expected US housing data, which in turn further pushed the US dollar lower," said BNP Paribas analyst Anne-Laure Tremblay. Confidence in the metal remains fragile as concerns persist that policymakers' efforts to address the eurozone debt crisis are inadequate and could keep European assets under pressure.
"All the bull-run dynamics are still in place, but you have this trend of the strengthening dollar, positive data out of the United States as opposed to weak data out of Europe," said VM Group analyst Carl Firman. "A strengthening greenback has traditionally seen gold in dollar terms decline. For a safe haven, you're looking at the dollar really. There's a lot of volatility in gold, in commodities, in other asset classes." European shares extended gains on Tuesday afternoon in thin trading, tracking Wall Street higher on the improved investor sentiment. Gold prices are set to struggle to make up significant ground for the rest of the month, with traders wary of adding to long positions before year-end, analysts said.
"Profit-taking and year-end book squaring by large investors, including mutual funds and macro hedge funds ... help explain the recent drop in prices," said HSBC in a note. Among other precious metals, silver was up 2.3 percent at $29.45 an ounce, tracking gold. Spot platinum was up 1.2 percent at $1,424.50 an ounce, while spot palladium was up 2.8 percent at $621.00 an ounce.
ETFS Physical Palladium, the US-based exchange-traded product operated by a unit of London's ETF Securities, saw an outflow of nearly 25,000 ounces, data for Monday showed, the largest one-day drop in its holdings in more than a fortnight. Its holdings have nearly halved this year, to just over 588,000 ounces from 1.1 million ounces on January 1.
Meanwhile Swiss trade data released on Tuesday showed Russia exported 5.16 tonnes of palladium to Switzerland in November. Russia is the world's biggest palladium supplier, selling both mined metal and government stockpiles onto the market. Speculation that its official stocks may be close to exhaustion have pushed up prices in recent years. The statistics also showed South African platinum exports reached their highest monthly level this year in November, at 3.7 tonnes.