Gold rose 1.3 percent on Tuesday, its biggest one-day gain in three months, as Federal Reserve Chairman Ben Bernanke's defense of U.S. bond-buying stimulus boosted bullion's inflation-hedge appeal.
The metal broke above $1,600 an ounce, extending its rally to a fourth straight day, after Bernanke said Fed policymakers are cognizant of potential risks from its loose monetary policy, but the risks did not seem material now.
Recent comments by top Fed officials suggesting the U.S. central bank could reduce or halt its asset buying had heavily pressured gold prices. A solid performance by U.S. equities driven by economic optimism had also prompted bullion selling.
Gold tumbled to a seven-month low on Thursday but has since rebounded 3.5 percent in the last four sessions.
"In the near term, this selloff may provide some opportunities given Bernanke's comment about the continuation of stimulus,'' said Robert Haworth, senior investment strategist at U.S. Bank Wealth Management.
Spot gold gained 1.3 percent to $1,615.16 an ounce, its biggest one-day rise since Nov. 23, 2012. It had earlier reached a one-week high of $1,619.66. U.S. gold futures settled up $28.90 at $1,615.50 an ounce, with trading volume around 45 percent above its 250-day average, preliminary Reuters data showed.
On Monday, gold had rallied as a sharp pullback in U.S. equities and uncertainty over the outcome of Italy's parliamentary election led to safe-haven buying.
In his testimony on the central bank's semiannual report on monetary policy, Bernanke said the Fed has all the tools it needs to retreat from its monetary support in a timely fashion.