(REUTERS) -- Gold firmed on Monday, rising towards $1,645 an ounce, as stock markets recovered from losses and the euro lifted from lows early in the day, while traders digested last week's Eurozone downgrades from Standard & Poor's.

The single currency edged above the near 17-month low it hit against the dollar in early trade, while European stock markets swung into positive territory. Oil prices also tracked higher.

Spot gold was up 0.3 percent at $1,644.19 an ounce at 1208 GMT, while U.S. gold futures for February delivery were up $13.90 an ounce at $1,644.70. Prices are still up 5 percent this month, despite a fall of 0.6 percent on Friday as the euro tumbled after the S&P downgrade.

Gold's relationship to bad news on the Eurozone debt crisis has been choppy in the past year, with the metal sometimes benefiting from fears over currency debasement and sometimes falling victim to a rising dollar.

Gold is not a hedge against problems in the euro zone, at least as far as the debt situation is concerned. That might look different in the worst case scenario, said Peter Fertig, an analyst at Quantitative Commodity Research.

Currently gold is moving along with ... exchange rate movements, but also crude oil and stocks markets, particularly the S&P 500 index, he said.

Stocks and the euro fell in early trade after rating agency Standard & Poor's downgraded nine of the Eurozone's 17 countries on Friday, with France and Austria losing their top-notch status.

Mass Eurozone ratings downgrades are unlikely to shake up investors too much, but with Greek debt talks at an impasse, pressure has been loaded on the bloc to build up its defences and last week's glimmers of optimism have been firmly doused.

Talks between Greece and its creditor banks to cut back on its debt ended without agreement on Friday, pushing Athens closer to default. Greek Prime Minister Lucas Papademos said on Monday he was confident a deal on a debt swap plan would be reached.

If these talks do not make progress, gold could come under further pressure, said HSBC in a note.

INDIAN DEMAND EASES

Money managers cut bullish exposure in gold futures and options in the week ended Jan. 10, leaving net length at its lowest level in nearly two years, according to data from the U.S. Commodity Futures Trading Commission.

On the physical side of the market, gold buying was lacklustre in main consumer India after the harvest festival season and as prices rose for a second session.

The head of India's biggest jewellery retailer said on Sunday that gold jewellery demand in India was estimated to have risen 5 to 7 percent in 2011 and is set to grow a further 10 to 15 percent this year, with bullion prices falling back after recent gains.

Jewellery sales in Italy, Europe's biggest gold jewellery exporter, fell sharply in 2011 and were expected to remain depressed in 2012 as the debt crisis and the government's austerity measures hit consumer demand, senior industry officials said on Sunday.

European demand has been hit by rising prices and economic concerns, which have hurt consumer confidence. People don't know if they should spend money or save, said Giuseppe Aquilino, chairman of Italy's federation of jewellery retailers Federdettaglianti Orafi.

Silver was up 0.5 percent at $29.86 an ounce, broadly tracking gold. Spot platinum was up 0.7 percent at $1,490.99 an ounce, while spot palladium was up 1.7 percent at $636.43 an ounce.

The gold:platinum ratio, which measures the number of platinum ounces needed to buy an ounce of gold, stood at 1.11 on Monday, up from 1.10 on Friday but well off the high of 1.15 it hit earlier this month.