Spot gold rose nearly 1 percent on Wednesday to its highest level in more than a month, as safe-haven demand returned on growing doubts over a resolution to the Eurozone debt crisis ahead of a key European Union summit later in the day.
Deep disagreement remained on critical aspects of the potential agreement among European policymakers on how to solve the debt crisis, dimming prospects for a comprehensive deal at the summit.
In the last few days gold has shown that it is well supported, and uncertainty on European debt situation has turned investors' interest to gold, said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
Some arbitrage buying from Shanghai also underpinned the market sentiment, said Fung. The popular Shanghai gold forward contract jumped more than 3 percent to about 352 yuan a gram, or $1,721 an ounce.
Spot gold rose 0.9 percent to a one-month high of $1,715.51 an ounce, before easing to $1,711.59 by 0319 GMT, on course for a fourth straight session of gains.
U.S. gold hit $1,716.9, its highest since September 23, and stood at $1,713.50, up 0.8 percent from the previous close.
Fresh buying from funds and short-covering also helped gold's rally, traders said.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.9 percent to a one-month high of 1,244.156 tonnes by October 25.
Trading volumes were thin, as market participants await for the result of the EU summit, traders said.
It is still a guessing game and all will be unraveled tonight, said a Singapore-based trader, adding that a disappointing outcome would likely further boost gold's safe-haven appeal.
Adding to the uncertainty on economic outlook, U.S. consumer confidence dropped unexpectedly to its lowest level in two-and-a-half years in October.
Spot silver lost 0.5 percent to $33.05, easing from a 4.6-percent rise in the previous session, its largest one-day rise in nearly three weeks.
Spot platinum rose to a 1-1/2-week high of $1,573 earlier, and eased to $1,571. The precious metal has already gained more than 4 percent so far this week, but remained in a deep discount of more than $140 to spot gold prices.
Investment interest in platinum group metals remained low due to uncertainties on the global economic outlook, as they are widely used in making autocatalysts.
The holdings of physically-backed exchange-traded platinum funds fell 3 percent from the end of September, and those in palladium ETFs dropped nearly 7 percent.
Markets in Singapore, Malaysia and India are closed for the Diwali holiday.