Gold climbed for a fourth session on Thursday as the euro hit a two-week high versus the dollar, benefiting from solid Spanish and French debt auctions, and European stock markets rose, indicating better appetite for assets seen as higher risk.

Spot gold was up 0.3 percent at $1,663.80 an ounce at 1241 GMT, having earlier peaked at $1,669.75, its highest since December 13. It has had a positive start to the year, up 6.4 percent since end December.

The euro was supported by strong demand and falling yields at Spanish and French debt sales on Thursday, which soothed worries over the euro zone debt crisis. Gains could spur a further squeeze of short positions.

European stocks rose on Thursday in brisk volume as investors rotated out of defensives and into banks. .EU

Rising risk appetite, a weak U.S. dollar and the breach of key resistances is giving gold the momentum to head towards the $1,700 an ounce level in the near term, said Pradeep Unni, senior analyst at Richcomm Global Services. Further resistance could be expected at $1,686, he added.

Risk appetite was helped by news that the IMF is seeking to more than double its war chest by raising $600 billion in new resources to help countries deal with the fallout of the euro zone debt crisis.

Traders awaited the outcome of talks between Greece and its private creditors, who meet for a second day of bargaining on a crucial bond swap deal on Thursday, with time running out for reaching a compromise needed to avoid a default.

LUNAR NEW YEAR LOOMS

Swiss bank UBS said in a note that gold's ability to rise even without the prospect of continuing strong physical demand, boded well for the precious metal.

Some participants may be reluctant to be long gold here, with the Lunar New Year next week impacting physical demand from many centers, particularly China, raising the risk that it won't be able to provide much of a price floor, it said.

Hence if gold can end next week higher, it would be another positive sign.

On the supply side of the market, Russian precious metals miner Polymetal said on Thursday it expects 2012 gold output to range from 590,000-640,000 ounces, up from 443,000 ounces last year, as it expands mining operations.

Silver prices tracked gold higher, up 0.9 percent at $30.76 an ounce. Its ratio to gold - the number of silver ounces needed to buy an ounce of gold - dipped to 54.1, down from a peak of 57.4 hit in late December, its highest in more than a year.

The gold: silver ratio has dropped back to...the base of our one-month range, said ScotiaMocatta in a note. A close below 54.00 will bring in sellers of the ratio looking for a return to the 50.00 area.

Spot platinum was up 1.2 percent at $1,533.24 an ounce, while spot palladium was up 1.8 percent at $676.22 an ounce.

Shares of Anglo American Platinum (AMSJ.J) tumbled 4 percent on Thursday after the world's top platinum producer said 2011 earnings likely fell by about a third, hit by costs linked to a black empowerment deal.

The company also said earnings were adversely affected by the high number of safety stoppages resulting in lower production, as well as higher costs, particularly for labor and electricity.