Gold rose decisively above $1,610 per ounce on Tuesday after testimony from Federal Reserve chief Ben Bernanke defended its bond-buying programme, easing market concern about a premature end to quantitative easing.
Spot gold gained 1.3 percent at $1,614.45 at 1647 GMT, after reaching its highest in a week at $1,619.66. U.S. gold futures for April delivery were up 1.7 percent at $1,614.40.
Continue Reading Below
"Gold rose after Bernanke's remarks, which were less bearish than the Fed's minutes," Nomura analyst Tyler Broda said.
"There is an evolution in terms of quantitative easing at the moment and I think while we work through that there are going to be times when the Fed is more dovish and times when is more hawkish," he added.
Federal Reserve Chairman Ben Bernanke's congressional testimony, as expected, strongly defended the U.S. central bank's bond-buying stimulus, saying its benefits clearly exceed possible costs.
Hints from the Fed that some members are becoming uncomfortable with its current ultra-loose monetary policy have hurt gold prices recently.
The euro was fragile on worries over Italian political turmoil after an election that saw the anti-establishment 5-Star Movement of comedian Beppe Grillo become the strongest party in the country, but left no group with a clear majority in parliament. Gold caught some safe-haven support on the uncertain outcome.
Former prime minister Silvio Berlusconi indicated his centre-right party might be open to a grand coalition with the centre-left bloc of Pier Luigi Bersani, which will have a majority in the lower house.
INVESTMENT REMAINS WEAK
Investment interest in the metal stayed weak. The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, reported its fourth successive daily outflow on Monday, of 7.8 tonnes.
That took its week-on-week decline to more than 50 tonnes.
Goldman Sachs cut its 2013 gold price forecast to $1,600 an ounce from $1,810 an ounce, saying the metal's recent price drop and an increase in U.S. real interest rates have led it to bring forward its projections for a decline in the metal.
If that projection proves accurate, it will mark the first year gold has recorded a lower average price year-on-year since 2001, when its record-breaking 12-year bull run began.
Among other precious metals, platinum briefly dipped into a discount to gold for the first time in over a month as it slid to a seven-week low at $1,577.49 an ounce, before recouping some of its earlier losses. Heightened risk aversion is hurting industrial commodities like the autocatalyst metal.
Analysts say its rally to 17-month highs earlier this month had also left it overstretched.
Spot platinum rose 0.5 percent at $1,1612.24, while spot palladium gained 0.9 percent to $739.97. Silver rose 1.1 percent to $29.35. (Editing by Veronica Brown)