Gold hit a six-week high on Tuesday, helped by safe-haven buying and good physical demand, with investors awaiting the release of U.S. economic data that may change bullion's short-term direction.
Brighter technicals and firm oil also lifted buying. Other metals gained, with platinum rising to a three-week high and silver rising to its highest level in more than two weeks.
Gold rose to $679.90 an ounce, the highest since July 25, and was quoted at $679.00/679.60 at 1416 GMT, up from $671.80/672.40 late in London on Monday, when the U.S. market was closed for the Labor Day holiday.
Gold remains remarkably well bid despite some dollar strength. It is playing a little bit of safe-haven role, physical demand is excellent and production is looking pretty sloppy, said David Holmes, director of precious metals sales at Dresdner Kleinwort Investment bank.
Despite high prices, producers can't even maintain the 2,500-tonne production level. So from a fundamental point of view, the market is quite good, he said, referring to annual global mine production of gold.
Gold output in South Africa, the world's biggest producer, fell 7.5 percent in the second quarter from a year ago, while Russia produced 76.9 metric tons of gold in the first seven months of 2007, 1.9 percent lower from last year.
Traders said brisk seasonal demand from India, the world's largest consumer, boosted physical trading in Asia and helped offset scrap sales. Gold imports to Turkey, jumped 40 percent to 178 tonnes in the first eight months of the year.
Gold is finding a bit of momentum of its own. It seems to be ignoring the dollar and moving higher, said James Moore, precious metals analyst at TheBullionDesk.com.
Sentiment is a lot firmer as the risk aversion does seem to be easing slightly. Investors have realized that gold did perform very well when other sectors were not doing that well.
Gold has rebounded more than 6 percent since falling to a seven-week low of $641.10 in mid-August, when investors sold gold and other metals for cash to cover margin calls on losses arising from a meltdown in the U.S. subprime mortgage market.
The dollar rose against the euro and showed little reaction to the Institute for Supply Management's report showing U.S. manufacturing expanded more slowly in August. Oil also gained.
Gold often moves in the opposite direction to the dollar and is generally seen as a hedge against oil-led inflation.
Investors awaited the Federal Reserve's beige book summary of the economy's performance on Wednesday and the monthly non-farm payrolls report on Friday.
Platinum rose as high as $1,275 an ounce and was last at $1,266.50/1,273.50, versus $1,264.50/1,271.50 on Monday.
Although the platinum market was expected to end the year with a surplus, we do not see this happening, given the strikes at the mines of the biggest producers and strong demand from platinum exchange-traded funds. We are still confident as far as the price is concerned, Commerzbank said in a daily note.
South African labor union, National Union of Metalworkers of SA (NUMSA), said 1,500 workers at three of Anglo Platinum's smelters and process divisions had downed tools. The company is the world's biggest platinum producer.
In other news, Angloplat announced a 35 billion rand ($4.85 billion) empowerment deal to sell mines to two black-led companies and distribute shares to its mostly black workers.
Palladium rose $2.80 to 330.80/334.80 an ounce, while silver rose to 12.24/12.27 an ounce, the highest since August 16, versus $12.08/12.13 on Monday.
(Additional reporting by Chikafumi Hodo in Tokyo)