Gold rose more than 2 per cent Monday, boosted by technical buying, expectations of widespread monetary easing and fear that political turmoil in Italy might exacerbate the euro zone's debt crisis.
Bullion posted its biggest daily gain in two weeks, after Germany's Chancellor Angela Merkel ruled out using gold to boost the euro zone bailout fund. In Italy, Prime Minister Silvio Berlusconi defied pressure to resign, complicating efforts to contain the euro zone's two-year old crisis.
Spot gold rose to a high of $1,795.61 (U.S), its loftiest since Sept. 21 and was up 2.3 per cent at $1,794.76 an ounce by 3:36 p.m. (ET).
U.S. gold futures for December delivery gained $35 to $1,791.10.
Trading volume was slow, in line with the 30-day norm. Some traders said low turnover in gold and other commodities was partially related to the demise of MF Global, whose customers were unable to trade their positions after the U.S. brokerage filed for bankruptcy protection last week.
Silver was up 2.3 per cent at $34.87, platinum was rose 1.4 per cent to $1,652.74, while palladium gained 1.3 per cent to $659.97.
Gold, a traditional safe haven which lately has been tracking riskier assets, has gained over 4 per cent in five sessions, reaching a 1-1/2-month high on Monday. U.S. equities also rose.
"The gold market is reacting to...the Federal Reserve, ECB and central banks around the world providing really cheap money. That has traditionally been very bullish for the gold market, and I don't think this time is any different," said Michael Cuggino, portfolio manager of the Permanent Portfolio Funds with $15-billion in assets.
Last week saw a surprise interest rate cut by the European Central Bank, while the Federal Reserve cut its U.S. economic outlook and left open the possibility of more market stimulus. Gold gained 2 per cent on the week, its second consecutive weekly gain.
"Gold managed to rally last week even though a slew of other risk assets ended in the red. Investors prefer the comfort of gold during times of global duress – Greece is on the brink of leaving the euro zone," said Adam Sarhan, CEO of Sarhan Capital.
Sarhan said gold last week posted a breakout on weekly charts, as it closed above $1,700, which was also the neckline of the bearish double-top pattern from earlier this year.
Gold drew support from uncertainty ahead of Italy's parliamentary vote on budget reforms, which could test Berlusconi's leadership of the euro zone's third biggest economy.
Italian bond yields hit euro lifetime high amid uncertainty.
"Gold does seem to be temporarily the safe haven. It's not being driven by U.S. investors but rather by other sources of business, such as the Europeans," said George Nickas, commodities broker with FC Stone.
"There's no enthusiasm that I can see from the U.S. investing public. People are waiting for European situation to clear up and U.S. economic data to return to normal," Nickas said.
CHINESE DEMAND RESILIENT
Reflecting strong physical demand was news China's gold imports from Hong Kong posted a sharp increase in September, as appetite in the world's No. 2 bullion consumer remained strong through a market rout.
Holdings of the SPDR Gold Trust , the world's biggest gold-backed exchange-traded fund, gained 1.513 tonnes on the day to 1,245.064 tonnes by Nov. 4, the highest in more than a month.