Gold prices Tuesday hovered near the previous day's closing price but safe-haven buying and favorable currency moves appeared set to lift the metal above $1,800 per ounce.
Gold has risen 4.2 percent in the last four trading days, creating opportunities for investors to book profits on the gains.
Besides profit-taking, gold faced a moderately stronger dollar Tuesday and competition from rising European equities, up on hopes Italian lawmakers would find a way to replace Prime Minister Silvio Berlusconi and, thus, begin substantive economic reforms.
However, behind the profit-taking and the current hope in Italian lawmakers, underlying trends favor more expensive gold.
For one, government gold buying is rising.
We expect demand for gold from the official sector to remain positive for quite some time, said Suki Cooper, analyst with Barclays Capital.
The weakening euro and currencies tied to the euro, like the Swiss franc, also are expected to make gold more expensive.
The surge in the gold-to-Swiss franc ratio was helped by recent comments from Swiss National Bank members hinting at the possibility of an increase in the euro-Swiss franc floor, said UBS strategist Edel Tully.
Our foreign currency strategists think that SNB action along these lines could potentially come as early as the Monetary Policy Assessment in December.
The most actively traded Comex contract for gold was up 30 cents to $1,791.40, while spot gold rose to $9.36 to $1,791.51.
The most actively traded Comex contract for silver was unchanged at $334.83, while spot silver added 12 cents to $34.82.