Gold futures rose on Monday following a drop in the dollar versus the euro and expectations of lower U.S. interest rates, which boosted investors' interest in the precious metal.
Gold for February delivery surged $13.30, or 1.7 percent, at $813.50 an ounce at 1:38 p.m. on the New York Mercantile Exchange.
The dollar fell against the euro ahead of the Fed's policy meeting on Tuesday where investors anticipate the U.S. will continues to cut borrowing costs. Analysts expect a quarter-percentage point cut to interest rates, making it the third consecutive cut this year.
The European Central Bank raised interest rates to fight inflation causing the euro to rise 11 percent against the dollar. This was the third straight session that the euro rose causing speculation that the ECB may raise interest rates again in 2008.
Silver was also up as its March delivery jumped 13.3 cents, or 1.7 percent, to $14.85 an ounce. Before today, the metal climbed 12 percent this year.
In last weeks trading, gold dropped $6.90, but posted a weekly gain of $11.10.
Interest rates, more credit-market jitters and contracting energy prices kept the precious metals in a volatile mood last week, and will be a feature in the week ahead as traders begin to position themselves for the pending holiday period and year-end, said James Moore, an analyst at TheBullionDesk.com, in a research note.