Gold settles above $1,200 an ounce


Gold rose more than 2 percent on Tuesday as the dollar weakened and stock markets slid, with concerns over tension between Russia and the West also helping push the metal through key chart levels, triggering fresh buying.

Spot gold rose to $1,204 an ounce, up 1.8 percent on the day. U.S. gold futures for February delivery settled $18.50 higher at $1,200.40 an ounce.

Gold prices are off 0.5 percent for the year. The most active contract on Dec. 31, 2013 settled at $1,206.60 an ounce.

Read More3 reasons to buy gold

A wave of risk aversion swept through global markets on Tuesday, with end-of-year caution and worries about Greece's future in the euro zone pushing European shares down 0.7 percent. A drop in oil prices also hurt sentiment.

Among currencies, the dollar index fell 0.3 percent, pressured by strength in the yen as investors sought the traditional safety of the Japanese currency amid end-of-year nerves over economic risks ahead.

Read MoreWhy Greece is not the risk it once was

"Gold... has been on something of a roller coaster for the past few days," Ed Meir, an analyst at INTL FCStone, said. "We suspect that the dollar weakening against the yen may have triggered some buying and also equity weakness, particularly in many emerging markets."

Gold traders said the metal was also being lifted by concerns over tensions between Russia and the West. Russia's Foreign Ministry said on Tuesday that a widening of U.S. sanctions against Moscow this week may hamper bilateral cooperation on some issues.

Read MoreUS Mint's American Eagle gold coin sales don't soar in 2014

For the year, gold is down about 1 percent, hurt by a stronger dollar and expectations of an interest rate rise in the United States.

Gold slumped 28 percent in 2013 as investor demand waned on the back of a robust U.S. economy and better-yielding stocks. Many analysts have forecast more declines in gold prices.

Some physical buying in China helped to support gold prices. Premiums in Shanghai were steady at about $4 an ounce on Tuesday.