Gold futures on the COMEX Division of the New York Mercantile Exchange rebounded on Monday, as the last weekend saw no interest rate increases in China as anticipated. Meanwhile, a weaker U.S. dollar also helped push up the gold price.
Silver and platinum both rallied.
The most active gold contract for February delivery jumped 13.1 dollars, or 0.9 percent, to 1,398.0 dollars per ounce.
A trader mentioned that many market participants had been selling gold last week, as they anticipated China would lift interest rates to curb higher inflation. But the fact that China has refrained from rate hikes gave a strong boost to the precious metal, as investors considered gold as a good hedge against inflation.
"There's a rule of thumb, each time any central bank raises interest rates, gold and silver tumbles, because it makes it more difficult to borrow money," said Mike Daly, a gold specialist with PFGbest in Chicago.
"It used to be that central banks always sold gold, but in the last five years, central banks started buying gold," said Daly.
The stable safe-haven demand from European investors continued to fuel gold's rally. "There are many investors in Europe, losing confidence in the euro as well as the dollar at this point, figuring they are only paper money, therefore they are using a weaker euro to buy gold right now," Daly added.
Meanwhile, the greenback lost some steam against the euro on Monday, boosting gold's appeal as an alternative investment.
Silver futures for March delivery climbed 1.019 dollars, or 3.6 percent, to 29.624 dollars per ounce. January platinum rose 22 dollars, or 1.3 percent, to 1,697.3 dollars per ounce.