Gold prices rose Monday on a stronger U.S. dollar and weaker risk appetite, as worries over sovereign debt in Greece and other major economies fuelled buying of the metal as a safe haven.
Growing fears over the prospect of monetary tightening in China prompted weakness in assets that are perceived as riskier, such as equities, crude oil and industrial metals like copper. Gold, however, rose 0.5 per cent.
Société Générale analyst David Wilson said the safe-haven appeal of gold was starting to come into play again, as the metal benefited from a flight to quality among investors.
"The combination of nervousness of debt and inflation is benefiting gold," he said.
Fiscal concerns were sparked by a Moody's report that said credit ratings of the world's four largest triple-A sovereign debt issuers - United States, U.K., France and Germany - were safe, but risks to their blue-chip status had grown.
Spot gold was at $1,106.15 (U.S.) an ounce at 3:07 p.m. ET, against $1,099.50 late in New York on Friday.
U.S. gold futures for April delivery on the Comex division of the New York Mercantile Exchange settled up $3.70 at $1,105.40 an ounce.
Concern over the fiscal health of peripheral euro zone economies like Greece has supported gold in recent weeks.
Commerzbank analyst Eugen Weinberg said the increased focus on growing government debt piles was underpinning interest in gold.
"It is helping the market because, if you are looking for security, you buy gold," he said.
On Sunday, Chinese Premier Wen Jiabao spurned foreign calls for the yuan to rise and showed no letup in scolding the United States over recent bilateral tensions.
Worries about further monetary tightening by China, the only major economy still growing rapidly, cast doubts about the nascent economic recovery, weighing on global markets.
There are signs that the inverse relationship between gold and the dollar continued to weaken. The dollar rose against the euro Monday, helped by a lack of concrete progress on the financial aid package for Greece.
Gold ended last week $30 weaker, briefly dropping below $1,100 an ounce on Friday as investors unwound positions added previously due to currency volatility.
The metal ignored a report that the German finance ministry was mulling the possibility of euro zone countries using central bank gold reserves to back a European Monetary Fund, after the Bundesbank said it was unaware of any such plan.
In mining news, an industry report showed gold producers cut hedges by 4 million ounces in the fourth quarter, and AngloGold Ashanti owns the largest hedge book at 3.49 million ounces.
Traders are awaiting further direction from U.S. data, including housing starts and import prices for February, and a Federal Reserve policy-setting committee meeting on Tuesday.
Among other commodities, silver was at $17.07 an ounce against $17.02, platinum was at $1,617.50 an ounce against $1,604.50, while palladium was at $459 against $460.