Gold rose more than 1 percent on Monday as the dollar fell versus the euro after France and Germany pledged to strike a proposal to recapitalize euro zone banks, while traders remained cautious ahead of further details of the plan.
German Chancellor Angela Merkel and French President Nicolas Sarkozy said after talks on Sunday that they aimed to come up with a sustainable answer for Greece's debt problems and agree how to recapitalize European banks.
Spot gold was up 1.4 percent at $1,659.80 an ounce at 0915 GMT. Prices of the precious metal have been choppy since they plunged as much as 20 percent in September from the record highs they hit early in the month.
Strong physical demand after Friday's price decline and as Chinese buyers returned to the market after a week-long holiday also helped support prices, as did worries that the latest plan to tackle the euro zone debt crisis could prove short-lived.
