London: Gold rose in Europe on Tuesday as the dollar extended the previous session's losses against the euro, with hopes for a global economic recovery encouraging investors to favour riskier assets over the greenback.
Gold's strength helped platinum and palladium to rise to their highest in over a year, boosted by hopes an economic recovery will lift demand and the launch of new exchange-traded products backed by the white metals in the US.
Spot gold hit a three-week high at $1,127.55 (Dh4,141.72) and was bid at $1,124.45 an ounce at 1044 GMT, against $1,121.00 late in New York on Monday.
"Gold has bounced from the lows on the back of dollar weakness we've seen in the last few days," said Standard Chartered analyst Daniel Smith.
But he said he was cautious on the outlook for the metal.
"Our view is that the dollar will be more rangebound than it was late last year, and that will make any upward rallies in gold difficult to sustain."
The dollar slipped across the board yesterday as investors poured fresh funds into riskier assets at the start of the year, and as the market awaited US non-farm payrolls due later in the week.
Weakness in the US unit boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Oil rose towards $82 a barrel, benefiting from rising demand for heating fuel as the cold snap continued in the US and Europe. Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation.
On the physical market, gold buying in India, the world's biggest bullion consumer in 2008, continued for a second day yesterday as a strong rupee made the metal cheaper for domestic traders, dealers said.
Analysts say there are signs that physical demand is returning as buyers become acclimatised to higher prices.
