Gold prices hit a one-month high on Wednesday as the euro held onto its early gains against the dollar after the European Central Bank kept interest rates unchanged, and as other assets seen as higher risk, like stocks and commodities, rallied.

Spot gold was up 1.1 percent at $1,635.70 an ounce at 10:08 a.m. EDT (1408 GMT), while U.S. gold futures for August delivery were up $20.40 an ounce at $1,637.30. Earlier spot prices rose to a high of $1,640.50 an ounce, their strongest since May 7.

The metal is building on a rally sparked on Friday by weak U.S. payrolls data, which reignited talk of a fresh round of monetary easing from the Federal Reserve. That helped it rebound from the 2012 low it hit in May during four months of losses.

(The stronger euro) is good news for gold, and the drop in bond yields we've seen over the last few weeks is also good news for gold, said Credit Suisse analyst Tobias Merath. But the correction we have seen over the last few months has gone too far to just be dismissed.

The overall technical background for gold is no longer that positive, he said. We would have to see $1,640, $1,650 breaking on a more sustained basis to change that. But this is definitely a good signal.

Other precious metals rose in gold's wake, with both silver and palladium climbing nearly 3 percent to their day's highs. Commodities rallied broadly, with crude oil up nearly 1 percent, as a stronger euro supported interest in dollar-priced assets.

U.S. stocks rose on hopes for a rescue of Spain's troubled banks, but comments from the European Central Bank president disappointed a market hoping for further stimulus to tackle the euro zone's debt crisis. .N

The dollar remains under pressure after Friday's poor reading of the U.S. jobs market.

VASTLY DISAPPOINTING

Gold's sharp rally after a vastly disappointing U.S. employment print last Friday and its ability to subsequently hang on to most of those gains is commanding attention, UBS said in a note.

Today is far more of a test of the follow-through interest, and this week there will be plenty of opportunities for gold to either pass the safe haven test or reverse back into its old risk-on shell, it added. So far, gold is attracting European buying and has traded up to the high of $1,637.

Last week's sharp rally in gold prices prompted a wave of scrap selling in India and elsewhere in Asia as market participants took advantage of higher prices, while fresh buying was sluggish on Wednesday.

Gloomy equity markets and high interest rates have forced investors in India to cash out of gold, said Prithviraj Kothari, president of the Bombay Bullion Association.

During last year's price run-up, scrap volumes were low, as Indian merchants withheld material ... in expectation of still higher prices, HSBC said in a note.

Following recent declines, the notion of even higher bullion prices may not be as widely held by Indian merchants, and recycled material is being handed in for processing at a much faster pace than last year, it said, adding that it might result in modest pressure on prices.

Among other precious metals, silver was up 4.4 percent at $29.74 an ounce, on track for its biggest one-day rise since late January, having earlier touched its highest since May 8 at $29.94 an ounce.

The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, corrected to 55.9 after hitting its highest for the year yesterday at 57.3 as the white metal outperformed.

Spot platinum was up 2.3 percent at $1,461.74 an ounce, while spot palladium was up 0.3 percent at $621.59 an ounce.