(REUTERS) -- Gold gained half a percent on Wednesday, on course for its biggest one-day rise in a week, on hopes Greece would deliver on a commitment to implement tough austerity measures and on China's pledge to keep investing in euro zone government debt.
Bullion rose in line with gains in the euro and equities on optimism about a Greek deal and comments from the Chinese central bank governor on willing to help the euro zone.
Gold, though viewed as a safe haven, has tracked the fortunes of riskier assets in the past few months, as market turbulence caused by the euro zone debt crisis forces investors to sell gold to cover losses elsewhere.
Markets are turning higher this afternoon probably on hopes of progress in Greece, said Ronald Leung, a physical dealer at Lee Cheong Precious Metals in Hong Kong, but adding that gold is likely to remain in consolidation mode in the absence of fundamental change on the situation in Europe.
Many analysts said they remained skeptical of a speedy resolution to the Greek debt crisis, after Athens had broken many promises and missed a number of deadlines in recent weeks to deliver a plan of reforms and austerity measures.
Spot gold gained nearly half a percent to $1,727.39 an ounce by 0740 GMT. U.S. gold gained 0.7 percent to $1,729.40.
Technical analysis suggested that spot gold could fall to $1,698 an ounce during the day, said Reuters market analyst Wang Tao.
Hedge fund manager and long-time gold bull John Paulson cut his gold ETF bullion holdings by about $600 million in the fourth quarter, a second straight reduction that was likely driven by client redemption needs as he remained upbeat on the metal.
Paulson's selling in the SPDR Gold Trust was more than offset by buying by other investors, reflecting long-term confidence in gold.
In the long run, the euro zone debt crisis is still supportive of gold, said Hou Xinqiang, an analyst at Jinrui Futures based in the southern Chinese city of Shenzhen.
In the short term, gold is due to stay in consolidation mode, with the lower end of the range at $1,700 presenting a buying opportunity.
Spot platinum rebounded after hitting a one-week low of $1,615.98 in the previous session, rising 0.7 percent to $1,634.74.