U.S. dollar helped boost demand for the precious metal

Gold futures on the COMEX Division of the New York Mercantile Exchange on Tuesday settled above the 1,600-dollar mark for the first time since Dec. 13, as a weaker U.S. dollar helped boost demand for the precious metal.

The most active gold contract for February delivery hiked 20.9 U.S. dollars, or 1.3 percent, to 1,617.6 dollars per ounce. Tuesday’s rebound also marked the biggest one-day rise so far this month.

Market analysts said that the rally is mainly due to the weakness in the U.S. dollar. Besides, some traders have viewed the recent selloff as excessive and are tentatively re-entering the gold market.

The euro hiked against the U.S. dollar on Tuesday, thanks to a sharp drop in Spanish short-term borrowing costs and data showing an improvement in the German economic outlook. Besides, better-than-expected data in the U.S. housing market helped restore market confidence.

The dollar index, which measures the price of dollar against six other currencies, including the euro, on Tuesday fell to 79.864, down 0.6 percent from the prior trading day. A weaker U.S. currency makes gold and other commodities less expensive for holders of other currencies to buy.

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