Selling pressure also declined as outflows from exchange-traded products have been easing this week.
Globally, stocks were charging higher, with Hong Kong's Hang Seng up 5.67 percent and France CAC 40 index rising nearly 2 percent. Futures on the S& P 500 index pointed to a higher open.
After the first round of liquidity constraints and the global sell-off including gold, the investment case in 2012 for gold due to strong fundamental and macro-economic factors is regaining momentum, Bayram Dincer, an analyst at Switzerland's LGT Capital Management, told Bloomberg. In the last few trading days, $1,600 levels offer a good buying opportunity.
UBS strategist Edel Tully said physical demand for gold is strong, particularly from Asia.
With key festivals approaching in the next months, prices near $1,600 are attracting physical buyers eager to pre-empt the scramble for metal at the last minute, Tully wrote in a client note. In Europe, physical demand for gold also stayed strong.
The euro fell ahead of what economists predict will be an interest rate cut Thursday by the European Central Bank, and the dollar extended the previous day's gains against a basket of key currencies.
Gold for December deliver rose $3.70 to $1,645.30, while gold for immediate delivery fell $1.82 to $1,638.21.
Silver for December delivery climbed added 47 cents to $30.81, while silver for immediate delivery rose 44 cents to $30.76.