Gold on Monday saw its biggest one-day rise since January as some dealers scrambled to cover short positions and the May options expiry triggered more buying.
U.S. gold futures for June delivery settled up 2.4 percent, its best percentage jump since January 15, at $1,203.20 an ounce. Meanwhile, spot gold rose 2.1 percent to $1,204 an ounce. On Friday spot prices slipped as low as $1,174.73 an ounce.
"It's quite undervalued and we've had a long period of consolidation around the $1,200 mark," said Mark O'Byrne, research director of bullion dealer GoldCore, noting that the breach of the $1,200 level spurred additional technical buying.
O'Byrne said that while there were several factors spurring the session's rally, short-covering could be the primary driver
Options-related buying also buoyed prices with U.S. May options set to expire at the end of the day with relatively heavy open interest at the $1,200 strike price, traders said.
The spot market jumped around $8 within a five-minute span shortly after 10 a.m. EDT, when technical buyers lifted prices above the 50-day moving average.