Gold surged to a two-month closing high on Monday, boosted by weakness in the U.S. dollar. February gold moved to $836.50, up $16 an ounce. The metal hit as high as $843.70.
The dollar dropped to a two-month low of 1.3703 versus the euro on Monday ahead of an expected interest rate cut by Federal Reserve. Gold usually moves opposite the dollar because of the precious metal's hedge appeal.
Following the conclusion of a two-day meeting on Tuesday, the Fed is widely expected to cut its key short-term interest rate by 50 basis points to 0.5%.
On the economic front, the New York Fed Index index fell to a negative 25.8 in December from a negative 25.4 in November, with a negative reading indicating a contraction in the sector. Economists had been expecting the index to fall to a reading of negative 27.0.
Separately, a report from the Federal Reserve said that industrial production showed a moderate decrease in the month of November, with a decrease in output from the manufacturing sector more than offsetting increased output from the mining and utilities sectors.
Industrial production fell 0.6 percent in November following a revised 1.5 percent increase in October. With the decrease, industrial production was down 5.5 percent compared to the same month last year.
Last week, gold added $68.30 from the previous Friday's close despite a $6 drop on Friday. The precious metal fell $67 last week, its first weekly decline in five weeks.
