Gold jumped nearly 1 percent on Tuesday, extending gains above a near-six-year low on short covering and as the dollar dipped from multi-month highs. Spot gold rose to a session high of $1,074.34 an ounce, before giving up some gains to trade up 0.7 percent at $1,071.60 by 0643 GMT. It had gained 0.5 percent on Monday. Speculators are holding record short positions in COMEX gold futures due to a looming US interest rate hike, but this could help gold prices in the near term, said analysts.
"Gold has the potential for further short covering to take prices higher, especially if emerging market physical demand stays strong," HSBC analyst James Steel said. But the key influences on gold this week would be the European Central Bank meeting on Thursday and the US nonfarm payrolls report on Friday, he said. If prices can hold above the $1,070 resistance level, more gains can be seen, said MKS Group trader James Gardiner. Gold's gains over the last two days have taken it away from $1,052.46, the metal's lowest since February 2010 hit last week. Bullion posted its biggest monthly drop in 2-1/2 years in November with a 7-percent decline.