Hopes that a deal on an aid payment for Greece is close further supported sentiment
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,729.65 a troy ounce during European morning trade, up 0.35% on the day.
Prices traded in a tight range between USD1,728.25 a troy ounce, the daily low and a session high of USD1,732.45 a troy ounce.
Gold prices were likely to find support at USD1,704.55 a troy ounce, the low from November 15 and near-term resistance at USD1,737.95, the high from November 12.
Sentiment improved after a report earlier showed that China’s HSBC Flash Purchasing Managers Index, the earliest indicator of the country's industrial activity, rose to 50.4 in November from a final reading of 49.5 in October.
It was the first expansion in manufacturing activity since September 2011, easing concerns over the growth outlook for the world’s second largest economy.
Meanwhile, German Chancellor Angela Merkel said an agreement to unlock a delayed bailout installment for Greece was still possible when euro zone finance ministers resume talks on Monday.
Talks between finance ministers and the International Monetary Fund ended without a deal on Tuesday, amid disagreements on how best to reduce the country’s debt to sustainable levels.
Weakness in the U.S. dollar also contributed to gains. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.1% to trade at 80.89, the lowest since November 9.
A weaker U.S. dollar usually pushes gold higher, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Markets participants continued to monitor developments surrounding the looming “fiscal cliff” in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.
There are fears the U.S. economy will fall back into a recession, unless a divided Congress and the White House can work out a compromise in the seven weeks left before the January 1 deadline.
Elsewhere on the Comex, silver for December delivery jumped 1.2% to trade at a five-week high of USD33.32 a troy ounce, while copper for December delivery added 0.3% to trade at USD3.506 a pound.
Trade volumes were expected to remain light on Thursday, with U.S. markets closed for the Thanksgiving holiday.