Gold prices on Tuesday clawed back from four days of losses after ratings agencies decided not to punish the U.S. for its inability to cut its sovereign debt.
Moody's, S&P and Fitch all declined to lower the credit rating of the U.S. after the Congressional super committee failed to agree on cutting $1.2 trillion from the $15 trillion national debt.
Fears of such a move sent stocks, the euro and precious metals tumbling on Monday and boosted the dollar and U.S. Treasuries.
But with ratings agencies holding their fire, an unexpected rise in U.S. home sales last month and no bad news from Europe investors sold dollars and moved into stocks, euro-denominated assets and gold.
Asian bourses were mixed, all major European stock indexes posted gains and the euro rose against the dollar. Futures on the Dow Jones Industrial Average, Nasdaq 100 and S&P 500 were mixed.
In early trading, gold, palladium and platinum were up one percent, while silver climbed 1.5 percent.
Gold also climbed on renewed Chinese buying.
There was a lot more activity in the Asian market this morning and (there's) the less aggressive selling across all asset classes, including gold, Credit Suisse analyst Tom Kendall told Reuters.
Running up to today, gold's been suffering because it's a source of cash, of U.S. dollars. When balance sheets are under stress if you need to raise dollars and you're holding gold it's an easy instrument to use.
China is not expected to be the only non-OECD nation to resume or begin a fresh round of gold buying.
We believe that gold may be approaching levels at which emerging market and official sector buyers would again become interested in acquiring bullion, HSBC analyst James Steel said in a note.
In the case of central banks, we believe that a host of emerging market official sector buyers will accumulate gold for the foreseeable future in a bid to diversify their dollar-laden foreign exchange reserves. A coterie of emerging market and central bank buyers, combined with gold purchases in the U.S., as disappointment about the super committee's likely failure becomes an economic and political reality, has the potential to stanch the gold selloff, we believe.
Until next week, though, price changes are likely to be exaggerated.
Market participants in the U.S. will be out for the Thanksgiving holidays (and) this is likely to lead to choppy moves characterized by wide gaps, clouding efforts to gather much meaningful insight from price action, UBS strategist Edel Tully said in a client advisory.
Gold for December delivery increased $17.60 to $1,696.20, while spot gold rose $16.52 to $1,693.39.
Silver for December delivery was up 70 cents to $31.82, while spot silver added 56 cents to $31.80.