London: Gold hit three-week highs on Tuesday as sliding oil prices knocked stock markets and concerns simmered over Greece's future in the euro zone, prompting investors to seek out bullion as a safe store of value.
European shares resumed their sell-off after Monday's slump, with energy stocks declining as oil prices fell 3 per cent to new 5-1/2 year lows.
That prompted investors to buy assets perceived as offering safety, such as US and German government bonds, the Japanese yen and gold, offsetting the negative impact on the metal of a stronger dollar.
Political uncertainty in Greece has also renewed fears of a possible Greek exit from the euro zone ahead of the country's elections on Jan. 25.
Spot gold was up 0.7 per cent at $1,211.50 an ounce at 1041 GMT, having earlier touched a peak of $1,214.40, its highest since Dec. 16. The metal rose 1.3 per cent on Monday.
"There are some factors that are playing in gold's favour right now," Julius Baer analyst Carsten Menke said. "We've had these issues in Greece again, and talk about Grexit. In 2011, when the euro crisis struck, this was of course a big driver of the gold market, so some people are moving back into gold because of this."
US gold futures for February delivery were up $7.50 an ounce at $1,211.50. Gold priced in euros hit its highest since Sept. 2013 at 1,019.15 euros an ounce, benefiting from a 0.25 per cent drop in the euro versus the dollar.
Holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, rose 0.25 per cent to 710.81 tonnes on Monday, though they remained near a six-year low.
Meanwhile data showed hedge funds and money managers raised their net long positions in gold futures and options for the first time in three weeks in the week to Dec. 30.
Premiums on the Shanghai Gold Exchange were $5-$6 an ounce over the global benchmark on Tuesday, seen by dealers as a sign of good demand in top consumer China.
Buying in China has increased in recent weeks ahead of the Lunar New Year holiday, when gold is bought for gifts, and demand is likely to stay strong until the holiday in February.
Among other precious metals, silver was up 0.7 per cent at $16.25 an ounce. Platinum was up 0.9 per cent at $1,215.50 an ounce, while spot palladium was up 1.1 per cent at $798.45 an ounce.
Copyright: Thomson Reuters 2015