Gold rose on Tuesday as solid lending data helped the euro rebound against the dollar ahead of a European Central Bank meeting this week, which is expected to clarify the outlook for monetary policy.
The metal was also underpinned by expectations that the Federal Reserve will push the first U.S. interest rate rise in nearly a decade back to next year. An increase would raise the opportunity cost of holding non-yielding gold.
was up 0.5 percent at $1,176.21 an ounce, while U.S. gold futures for December delivery settled up $4.70 an ounce at $1,177.50.
Gold touched a 3-1/2 month high last week on bets the Federal Reserve would not raise U.S. rates amid concerns about the global economy.
"The precious metal is moving higher as expectations are that the Fed will not move the interest rate higher this year," Naeem Aslam, chief market analyst at Ava Trade, said.
In the near term, gold was being influenced by fluctuations in the dollar, in which it is priced. The U.S. currency fell 0.06 percent against the euro on Tuesday after quarterly lending data from the ECB showed euro zone banks had loosened their lending standards more than expected over the last few months.
The euro was also lifted by remarks from ECB Governing Council member Christian Noyer late on Monday that no adjustment was needed in the bank's quantitative easing programme. The ECB started buying 60 billion euros ($68 billion) of assets a month in March to stave off deflation.
The ECB governing council meets to discuss policy on Thursday in Malta. Markets expect a dovish message from the bank, highlighting a willingness to act to boost inflation, but few if any concrete adjustments to its asset purchase program.
Investor appetite for gold showed signs of sharpening on Monday, as the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, reported a 3.6-ton rise in its holdings.
"What's changed between July and today is that a Fed hike for 2015 has now been written off," ING analyst Hamza Khan said.
Switzerland's gold exports to China and Hong Kong combined last month hit their highest in more than a year and a half, data from the Swiss customs bureau showed, though exports to India fell by two-thirds.
Confidence in the metal remains fragile, however. Delegates to the London Bullion Market Association's annual gathering in Vienna predicted on Tuesday gold prices will slip to $1,159.88 by October next year.