Gold prices hovered above $1,790 on Tuesday, after soaring more than 2 percent in the previous session, supported by safe haven demand as Italy took center stage in the euro zone debt crisis.

Italian government bond yields soared to near 15-year highs, putting the euro zone's third largest economy front and center of the region's debt crisis, despite efforts by policymakers scrambling to stem growing contagion.

Gold will continue to trend higher due to the euro zone situation and should have no problem rising above $1,800 in the short term, said Hou Xinqiang, an analyst at Jinrui Futures.

Although he cautioned that prices could correct after gold pierces through that level under pressure of profit-taking trades.

Spot gold edged down 0.2 percent to $1,791.40 an ounce by 0623 GMT (1:23 a.m. ET), easing from a 6-1/2-week high of $1,798.09 hit in the previous session. Gold traded in a narrow range of about $5 during the day.

U.S. gold edged up 0.1 percent to $1,793.10.

Technical analysis suggested spot gold could target $1,823 to $1,829 range during the day, said Reuters market analyst Wang Tao.

Spot gold prices have rallied nearly 5 percent so far this month, as mounting doubts over the euro zone's ability to tackle its two-year-old debt crisis drove investors to safe-haven assets, and decoupled gold from other commodities which it had followed through much of the past two months.

The world's biggest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose 0.85 percent from the previous session to 1,255.66 tonnes by November 7, the highest in more than two months.

For the moment the market is worried there is still further liquidation to come, but we believe that is going to come to an end, said Michael Jansen, commodities analyst with JPMorgan.

There has been a very observable transfer of gold ounces in terms of investment capital from hedge funds, wholesale funds, bullion banks, toward the retail community, and that has put a floor in the price.

Jansen forecast an average $1,869 for gold prices in 2012.

The physical market was muted, as dealers reported light selling and little buying in Singapore.

The sellers are not eager to cash out before prices hit $1,800, said a Singapore-based dealer, People are basically watching what is going to happen in Europe.