Gold prices rose more than 1 per cent Monday, scaling a five-week high of $1,161.50 (U.S.) per ounce, on the back of dollar weakness as traders bet on U.S. interest rates staying low in the immediate future.
Strong trade data in China, including booming demand for oil and copper, boosted global risk appetite and helped boost prices of commodities and gold.
"Gold has been underperforming the rest of the commodities complex. It is due to trade higher," said Jonathan Jossen, Comex gold floor trader.
Spot gold was at $1,151.80 an ounce at 2:44 p.m. ET, against $1,137.90 late in New York on Friday. U.S. gold futures for February delivery on the Comex division of the New York Mercantile Exchange settled up $12.50, or 1.1 per cent, at $1,151.40 an ounce.
The metal is building on gains made in the first trading week of the new year, when prices climbed nearly 4 per cent. However, other precious metals and crude oil have been outpacing gold.
"The technical situation for gold improved last week," Peter Fertig, a consultant at Quantitative Commodity Research, said. "In addition of course, the U.S. dollar has given back some of the gains it made at the end of last year.
Gold hit a record high $1,226.10 an ounce in December.
The dollar fell Monday following disappointing U.S. jobs data Friday and after St. Louis Federal Reserve Bank President James Bullard official said U.S. interest rates are likely to stay low for some time.
Other commodities rose on the back of the dollar's decline, with industrial commodities boosted by stronger-than-expected Chinese data.
Growth in China's imports and exports last month beat expectations, providing fresh evidence of economic recovery. One analyst said the trade data suggested December industrial output grew by more than 25 per cent year-on-year.
"With the Chinese data out, people are expecting a faster recovery in global growth, which could see some gold buying for those who believe it is an inflation hedge," said Walter de Wet, an analyst at Standard Bank.
In New York, the world's largest gold-backed exchange-traded fund, SPDR Gold Trust reported a near four-tonne outflow on Friday.
Its holdings slipped just over 14 tonnes, or 1 per cent, in the first trading week of the new year.
Analysts said they expected growth of precious metals ETFs to slow in 2010 compared with last year.
Among other precious metals, silver tracked gold higher to $18.52 an ounce against $18.44. Platinum hit a 16-month high of $1,594.50 and was last at $1,592.50 against $1,574.50, while palladium was at $430.50 against $425.50.
Both platinum and palladium have benefited from the launch of the first U.S.-based ETPs backed by the metals Friday.
"We think platinum is poised to substantially benefit from increased investment demand given its already favourable fundamental outlook," Morgan Stanley said in a note.
Industry figures released on Monday showed China's auto sales surged past the United States to reach record levels in 2009, underscoring China's importance to the global auto industry as the world's biggest market.