(Reuters) - Gold prices rose back above $1,625 an ounce in Europe on Tuesday, extending their positive early start to the year as the dollar's retreat versus the euro made the metal more attractive for holders of other currencies. Spot gold was up 1 percent at $1,626.76 an ounce at 1041 GMT. It is already up 4 percent from the start of the year despite a retreat in the euro in the same period, recovering some of the 10 percent losses the metal posted in December. "A big part of the weakness into the end of the year was people taking profits and liquidity being a bit lower," said Macquarie analyst Hayden Atkins. "I would expect that to unwind, and maybe that's why we're seeing stronger gold even when the euro is tending to weaken. You don't have that length there any more." He said he expected gold's inverse link to the dollar to drive prices in this year. The euro rose to a session high versus the U.S. unit on Tuesday as sovereign and macro demand for the single currency triggered stop-loss orders on short positions. Data from the Commodity Futures Trading Commission showed record euro net short positions and analysts expect the single currency will benefit from bouts of short-covering. The euro is down 1 percent so far this year, however. European shares also rise after positive corporate results, while safe-haven German bond futures opened lower. Despite this, sentiment towards European assets remain fragile as investors worry over euro zone debt levels. .EU "The market is still in the grip of the sovereign debt crisis in the eurozone, with auctions of Spanish and Italian government bonds due at the end of the week," said Commerzbank in a note. "It is questionable whether the entire planned volume can be placed on the market. Gold should be well-supported against this backdrop, and also given the current high physical demand." Buyers in India, the world's biggest gold consumer, took advantage of a drop in local prices to a one-week low to stock up ahead of wedding season beginning later this month, dealers in Mumbai said. "Buying will continue until March," said Harshad Ajmera, proprietor of JJ Gold House in Kolkata. India's central bank has allowed four more banks to import precious metals, a move that would boost competition and help reduce premiums in the world's number one importer of bullion. Silver was up 2.2 percent at $29.64 an ounce, largely tracking gold. PLATINUM PROSPERS Platinum group metals were the biggest risers in percentage terms, with spot platinum up 2.3 percent to $1,456.24 an ounce and spot palladium up 3.4 percent at $634.22 an ounce. Platinum earlier hit a one-month high at $1,462.50. The gold/platinum ratio -- a measure of the number of platinum ounces needed to buy an ounce of gold, which has typically held below 1 -- retreated to 1.12 after hitting its highest in at least 25 years on Monday at 1.16. As well as riding on gold's coat-tails, platinum was benefiting from reports that Eskom, the power utility of major platinum producer South Africa, had warned of a power shortage. Platinum's cheap price compared to gold and the threat of supply constraints from South Africa have made it attractive to buyers, analysts said, although stocks are still relatively plentiful and the demand outlook in Europe is soft. "Near-term, the possibility of a short-covering rally cannot be ignored," said UBS in a note. "But it doesn't really change the obstacles that platinum will likely encounter this year." "Fundamental support alone, from the supply side in this case, is clearly not a big enough reason to prompt investors to return to platinum in their droves." "We have few doubts that platinum will be trading much higher than current levels in six months from now, but for now, the potential for further negative twists and turns in the wider macro environment presents too strong of a challenge for investors to rush back in," it added.

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