SINGAPORE: Spot gold gained 0.8 per cent on Monday, extending a 1.2-per cent rise in the previous session, as worries about a worsening debt crisis in the euro zone drove investors to seek safety in bullion.
Investors will focus on a policy meeting of the US Federal Reserve on Tuesday and Wednesday. Any form of stimulus for the economy could buoy gold prices.
"Near-term support will be offered by Friday's bullish hook reversal pattern, ongoing tensions in the euro zone, the expectation that the Fed conducts some form of monetary easing, and the likelihood that President Obama proposes spending cuts that are unlikely to be passed," said MF Global in a research note.
But it cautioned that gold prices could reverse later in the week if the Fed falls short of a third round of quantitative easing. Its $600 billion bond-buying programme that ended in June was a factor behind gold's rise of 28 per cent so far this year.
Spot gold gained half a per cent to $1,820.29 an ounce by 0643 GMT, after rising more than 1 per cent in the previous session.
US gold also rose half a per cent, to $1,822.90.
Technical analysis suggests that spot gold is likely to zigzag up towards $1,930 an ounce, with an immediate target at $1,860, said Reuters market analyst Wang Tao.
As confidence in the euro eroded, the dollar, another traditional safe haven, rose strongly against a basket of currencies .
"Gold and the dollar will remain the outperformers as equities and base metals look weak today," said a Singapore-based trader.
Gold prices are expected to hit $2,200 by 2012, supported by the economic uncertainties in Europe and the United States, said the chief executive of AngloGold Ashanti , the world's third-largest gold producer.
Money managers slashed their bullish bets in gold futures and options in the week ended Sept. 13, after the price of bullion fell sharply from record highs, according to CFTC data.
