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Gold Rises Above $1,690 on Japan Stimulus

Anthony Bradshaw | Getty Images

Gold rose on Tuesday as the Bank of Japan's pledge to launch an economic stimulus effort and a five-year high in U.S. equities prompted nervous investors to buy gold.

The metal rose for a second day after the Bank of Japan said it would switch to an open-ended commitment to buying assets next year and double its inflation target to 2 percent in its most determined effort to boost its stagnant economy.

Bullion has still failed to close above strong technical resistance near its 50-day moving average at $1,690 an ounce as well as the $1,700 mark, even though it had been testing them in the last several sessions.

(Read More: HSBC Cuts 2013 Gold Forecast)

"We've seen quite a bit of selling pressure that's coming at these levels. As S&P and stocks get into this overbought territory, the uncertainty is helping drive money back into precious metals as a safe haven," said Tom Power, senior commodities broker at brokerage RJ O'Brien.

U.S. stocks mostly edged up on Tuesday after ending last week at five-year highs, but gains were limited with investors showing caution as the earnings season picks up speed. On charts, the S&P 500 index's 14-day relative strength index (RSI) rose to near an overbought 70, hovering near its highest since September 2012.

Spot gold was up 0.1 percent at $1,691.24 an ounce. Spot gold has not broken above $1,700 since Dec. 18.

U.S. gold futures for February delivery settled up $6.20 at $1,693.20 an ounce.

Trading volume, which included turnover from Monday's U.S. Martin Luther King Jr. holiday, was about 10 percent above its 250-day average, preliminary Reuters data showed.

Traders were monitoring February COMEX options ahead of their expiration on Jan. 28 following a strong rise in open interest recorded in call options at the $1,710 strike.

A further increase in gold prices above the popular call strike prices at $1,700 and $1,710 could trigger options-related buying and additional buy-stops, analysts said.

Spot silver rose 0.7 percent to $32.20 an ounce.

India Import Duties, Reuters Poll

The gold market has for now ignored news that India more than doubled the import duty on gold alloy on Tuesday. The move comes on the heels of a tariff increase for refined gold, as New Delhi tries to curb demand in the world's biggest bullion importer and rein in a record current account deficit.

A Reuters poll of 37 analysts showed gold could test record average highs of $1,775 and $1,780 in 2013 and 2014 respectively, but suggested its 12-year long bull run might be reaching a plateau.

Spot platinum was up 1 percent at $1,689.49 an ounce, while spot palladium rose 1.2 percent to $723.72 an ounce.

The platinum group metals have been underpinned by worries about widening deficits on the back of last week's news of output cuts in South Africa and hopes for an improvement in global demand.

Analysts forecast an average palladium price of $745 an ounce for 2013, 16 percent above last year's average of $641 an ounce and an average $1,700 an ounce for platinum, up 10 percent from 2012's average $1,546