Gold rose for a second session on Tuesday as its safe-haven appeal increased after the International Monetary Fund cut its global economic growth forecasts and weak German industrial data stoked further concerns.
Bullion rose as the dollar fell after the IMF warned of weaker growth in core euro zone countries, Japan and big emerging markets such as Brazil. Global equities tumbled, led by an over 1 percent drop in the S&P 500 index.
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Gold made a big turnaround on Monday as the dollar's sharp retreat sparked new physical demand and short covering after bullion earlier hit a 15-month low.
However, gold did not rise much further, despite the widening losses in equities.
"Following yesterday's rally, traders are in a wait-and-see attitude now after the IMF lowered world growth and issued some market risk warnings," said George Gero, vice president at RBC Capital Markets.
Spot gold was up 0.4 percent at $1,211.20 an ounce by 3:18 p.m. EDT (1918 GMT). It jumped 1.3 percent on Monday, its biggest one-day gain in two months.
A four-year high in the dollar against major currencies sent gold to a near four-year low of $1,180 an ounce last week.
The dollar index fell 0.4 percent for a second daily loss on Tuesday.
U.S. COMEX gold futures for December delivery settled up $5.10 at $1,212.40 an ounce in heavy trading.
Also underpinning gold was a much greater-than-expected drop in German industrial output in August, the biggest since the financial crisis in early 2009.
In the retail gold market, private investor sentiment toward the metal rose in September as bullion's drop below $1,200 an ounce triggered demand, according to a survey by online precious metals market BullionVault.
The Gold Investor Index, which measures the balance of customers adding to gold holdings over those reducing them, rose to a seven-month high of 53.4 in September from 51.7 in August. A reading of 50 signals an equal number of net gold buyers and sellers.
Traders were also awaiting the return of Chinese buyers on Wednesday. China, the top buyer of gold, has been away since the beginning of the month for its National Day holiday.
Palladium rose 2.9 percent to $782.60 an ounce, its biggest one-day gain in over six months, helped by short covering after the metal fell on Monday to its lowest since Feb. 27. The metal has also dropped 17 percent from $910 last month, which was its highest level since February 2011.
Platinum was up 1.3 percent at $1,255 an ounce. Silver dropped 0.8 percent to $17.16 an ounce. It hit its weakest level since March 2010, at $16.66, on Monday.
(By Frank Tang and Clara Denina; Additional reporting by A. Ananthalakshmi in Singapore; Editing by Pravin Char, William Hardy and Tom Brown)