Gold rose on Tuesday as volatility in the currency market triggered by Japan's aggressive monetary easing plan lifted bullion's appeal as a hedge against inflation and currency fluctuations.
Silver, often more volatile and speculative than gold, rose 2.5 percent for its biggest one-day gain in five months.
Bullion climbed to a one-week high as the dollar fell against the euro and the yen, with the Japanese currency recovering from a four-year low set against the greenback earlier in the session.
Analysts said pent-up buying boosted gold after it largely failed to rally after the Bank of Japan pledged last Thursday to inject about $1.4 trillion into the economy over two years. The metal ended the week down 1 percent.
Gold's recent weak performance in light of the Cyprus banking crisis and signs of a continuation of the Federal Reserve's monetary stimulus, however, suggested the metal is vulnerable to further selling.
"We don't have a resolution yet as to whether gold has found the bottom," said Mark Luschini, chief investment strategist of Janney Montgomery Scott, a broker-dealer with $55 billion in assets under management.
Gold was up 0.7 percent at $1,583.90 an ounce.
U.S. gold futures for June delivery settled up $14.20 at $1,586.70, with trading volume about 30 percent below its 30-day average, preliminary Reuters data showed.
The metal also benefited after the U.S. government said wholesale inventories fell the most in nearly 1-1/2 years in February, prompting some economists to lower their estimates for first-quarter economic growth.
Earlier in the session, gold rose as data showed China's consumer inflation cooled in March, which left policymakers room to keep monetary conditions easy.
Silver was up 2.5 percent at $27.93 an ounce, its biggest one-day gain since early November.
Banks Cut Gold Outlook
UBS and Deutsche Bank cut their 2013 gold price forecasts on Tuesday, with Deutsche lowering its price view by 12 percent to $1,637 an ounce, saying returns from the metal this year may be the worst since 2000.
(Read More: Why Gold Will Continue to Underperform)
In the physical market, Hong Kong's net gold flow to mainland China rebounded last month from three-month lows in January, reflecting increased demand ahead of the Lunar New Year holiday, data showed on Tuesday.
Traders will now closely monitor minutes from the Federal Reserve's latest policy meeting, set to be released on Wednesday, for clues on U.S. monetary policy, particularly any changes to the central bank's $85 billion monthly purchases of mortgage-backed bonds.