Gold prices rose more than half a percent on Monday as growing optimism that European leaders will sign off on a rescue deal for Greece lifted the euro, and after China's central bank further loosened monetary policy.

Spot gold was up 0.6 percent at $1,733.90 an ounce at 9:38 a.m. EST, while U.S. gold futures for February delivery were up $9.70 an ounce at $1,735.70.

Gold prices are up nearly 11 percent this year, benefiting from a rebound in the euro as well as expectations that U.S. monetary policy will remain loose, which cuts the opportunity cost of holding non-yielding bullion.

It seems today that euro zone finance ministers will approve the 130 billion euro bailout package for Greece, and that should reduce fear in the financial markets and have a positive impact on the euro in particular, said Peter Fertig, consultant at Quantitative Commodity Research.

The outlook (for gold) remains positive if we get a solution to the Greek crisis.

The euro rose 0.5 percent on Monday on expectations mounted that euro zone policymakers were set to approve Greece's long-awaited second bailout, averting a messy default, and after China eased monetary policy to stimulate growth.

Euro zone finance ministers are expected to approve a second deal for Greece when they meet at 11:00 a.m. EST, a move they hope will draw a line under months of turmoil that has shaken the currency bloc.

Other assets seen as higher risk rallied along with the euro, with European equities reaching their highest in nearly seven months and oil prices up more than $1 a barrel. Safe-haven German government bonds slipped.

While better appetite for risk is currently supporting gold, analysts say the appeal of other investments could keep prices rangebound this year.

The risks (in Europe) could dissipate modestly in the near term. Certainly, in China, there is a growing acceptance that the government will step in to support growth, and things look like they're stronger than expected in the United States, said Deutsche Bank analyst Daniel Brebner

Globally, it looks like risk assets are being accumulated by investors, and in that kind of environment, gold should perform reasonably well, he added. But I would argue it could underperform some of the other metals, the base metals and the white precious metals.

MONEY MANAGERS CUT GOLD LENGTH

Money managers in gold futures and options reduced their net long position by about 6 percent in the week of February 14, their first decline in weeks, latest data from the U.S. Commodity Futures Trading Commission showed on Friday.

The decline in net speculative length affirms our view that the aggressive moves at the end of January were largely as a result of overexcitement after the Fed's dovish announcement (that rates will stay low), said Standard Bank in a note.

Consequently, we remain cautious of gold's near-term prospects, and would not be surprised to see further weakness emerge this week.

Holdings of gold-backed exchange-traded funds tracked by Reuters rose by 115,730 ounces last week, a sixth consecutive week of gains, to 70.3 million ounces.

In China, which is challenging India for the title of world's top bullion consumer, the Shanghai Gold Exchange said it will cut trading fees for several of its precious metals contracts to reduce transaction costs, as it sought to keep its fees competitive after a rival bourse cut margins last week.

Silver was up 0.9 percent at $33.52 an ounce, while spot platinum was up 0.9 percent at $1,645.24 an ounce and palladium was down 0.7 percent at $689.98 an ounce.

Platinum prices have climbed nearly 18 percent this year, benefiting from supply concerns in major producer South Africa.

The South African miners' union said on Saturday Impala Platinum (IMPJ.J), the world's second-largest platinum producer, has agreed to re-instate all 17,200 workers who were dismissed following an illegal strike.

The platinum/palladium ratio, or number of palladium ounces needed to buy an ounce of platinum, held near its 2012 high of 2.4 on Monday as platinum continued to outperform.