Gold jumped 1 percent on Thursday as jewelers rushed to buy after prices dropped early in the session, but declines in other markets could cap gains as uncertainty about a resolution of Europe's debt crisis stoked fears for global growth.

Stocks fell in Asia and copper futures dropped more than 5 percent on mounting worries that Europe's debt problems will plunge the world economy into a second financial tailspin.

Spot gold added $18.09 an ounce to $1,625.99 by 0608 GMT, having fallen to a low around $1,582. It had plunged to a two-month low of $1,534.49 on Monday -- down from a lifetime high around $1,920 an ounce struck in early September.

The dollar is likely to strengthen on a broad scale, at least short-term. That's definitely going to be weighing on performance. Closer to the 200-day daily moving average, we should find the bottom and I think that's still there, said Dominic Schnider, an analyst at UBS Wealth Management.

But I am confident that with lower prices, you are going to see very strong jewelry offtake, especially as we head toward Diwali on October 26, said Schnider, referring to the Hindu festival of lights in main gold consumer India.

U.S. gold futures rose $8.7 to $1,626.8 an ounce.

The euro gained on short-covering in volatile, commodity-driven trade after riskier assets bounced off intraday lows on Thursday, but was still on track to mark its worst quarter since early 2010, with traders preparing for further falls.

The uncertainties about global economic growth, mainly sparked by the lack of consensus on a lasting solution to the euro zone debt crisis, have driven gold prices to record highs since July.

But declines in other markets prompted speculators to cash in to cover losses, and investors were spooked by a revolt within the government of German Chancellor Angela Merkel ahead of a vote to expand Europe's bailout fund on Thursday.

Lower gold prices stirred up buying in Asia, sending premiums for gold bars to their strongest since at least February in Singapore and Hong Kong. In India, the premiums jumped to their highest in a year.

Traditionally in India, retail gold demand gains pace from the month of August when the festival and wedding seasons start, culminating with the Diwali.

Gold jewelry is an essential part of the dowry basket that Indian parents give their daughters at weddings.

Clients have called and told me they want to buy gold bars at whatever premiums. That is if you could find gold bars, said a physical dealer in Singapore. I don't sell anything to Vietnam because there's no gold available.

The State Bank of Vietnam has granted quotas for gold companies and banks to import four to five tons of the precious metal this week in an effort to narrow the gap between domestic and world prices, an industry source said on Thursday.

This is the fourth time that such imports have been authorized since August, with the last one a week ago.

Physical demand is still there. Everyone in Asia is buying. Everybody is buying gold and they want delivery, said another physical dealer in Singapore.

We have stocks of gold bars, but it's not enough to satisfy demand, said the dealer, adding that buyers came from India, Singapore, Indonesia and Thailand.

Gold's steep correction, however, has not yet unnerved investors in the No. 1 gold exchange-traded fund, SPDR Gold Trust.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust (GLD), and that of the largest silver-backed ETF, New York's iShares Silver Trust remained unchanged on Wednesday from Tuesday.