By Arpan Mukherjee Of DOW JONES NEWSWIRES WELLINGTON (Dow Jones)--Gold traded in a relatively tight range in Asia Monday, gradually giving up gains over the course of the day, with traders expecting cautious moves ahead of key gatherings this week that include a European Central Bank rate-setting meeting and a European Union summit. The yellow metal rose about 0.5% early in the session to hit an intraday high of $1,754.60 a troy ounce. At 0516 GMT, spot gold was at $1,745/oz, down 30 cents from its previous close. "The uncertainty in Europe is keeping most investors on the sidelines," a Hong Kong-based trader said, noting that there was little physical demand in the region due to high prices. While the news that Italian Prime Minister Mario Monti's cabinet has approved a law aimed at making sure Italy wipes off its budget deficit by 2013 helped to lift sentiment, investors remained largely wary ahead of a Monday meeting of German Chancellor Angela Merkel and French President Nicholas Sarkozy to discuss potential solutions to the euro-zone sovereign debt crisis. "We believe the ongoing threat to the value and integrity to the euro, the renewed prospect of QE3 [a third round of 'quantitative easing,' or government asset buying] in the U.S. and negative real interest rates are good news for gold/silver investment demand and prices in all currencies," Morgan Stanley said in a note. Analysts expected gold to remain supported ahead of the ECB's meeting on Thursday, as an anticipated interest rate cut could boost liquidity and hence demand for the yellow metal, which is some investors see as a store of value during economic turmoil. The recent escalation tension between Iran and the West after Iran said that it had shot down a U.S. stealth drone near the country's eastern border could weigh on broader market sentiment and help to underpin demand for gold as a safe-haven asset. The uncertainty "will prevent traders and investors from going short on gold and silver," Insignia Consultants Director Chintan Kanani said. Silver outperformed gold early in the session, rising about 1.3% to an intraday high of $33.05/oz. ScotiaMocatta tipped resistance at the Nov. 17 high of $33.99/oz and said technical support is at $32/oz Spot silver was at $32.67/oz, up 3 cents, while palladium was at $644/oz, up $2 and platinum was unchanged at $1,543/oz. Commerzbank said in a note that it anticipates considerable upside potential for palladium after this year's slump, based on an assessment from the world's largest producer, Norilsk Nickel (GMKN.RS), that the palladium market could be in deficit next year. The industrial metal has fallen 25% since its year-to-date high reached Feb. 22. In the same period, platinum has shed 17%. -By Arpan Mukherjee, Dow Jones Newswires; 64-4-471-5990; arpan.mukherjee@dowjones.com

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