Investing.com - Gold futures traded higher during the U.S. afternoon session Monday, as the U.S. dollar weakened amid optimism U.S. lawmakers will reach a deal to avert the looming fiscal cliff crisis.
Escalating violence between the Israeli Army and Hamas militants in Gaza was also in focus.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,733.15 a troy ounce during U.S. afternoon trade, up 1.09% on the day.
Gold prices were likely to find support at USD1,704.55 a troy ounce, the low from November 15 and resistance at USD1,737.95, the high from November 12.
Market sentiment was bolstered after U.S. Congressional leaders said talks with President Barack Obama on Friday to avert the fiscal cliff, a combination of automatic tax increases and spending cuts due to come into effect on January 1, were "constructive."
There are fears the U.S. economy will fall back into a recession, unless a divided Congress and the White House can work out a compromise in the six weeks left before the January deadline.
Weakness in the U.S. dollar also contributed to gains. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.3% to trade at 81.01.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Meanwhile, the conflict between the Israelis and Palestinians escalated over the weekend, with both sides stepping up attacks in and around the Gaza Strip.
Hamas fired missiles at Tel Aviv on Sunday, while Israel extended its bombing of Gaza.
Greece also remained in focus. Concerns over the country’s debt woes persisted amid disagreements between the International Monetary Fund and Europe on how best to reduce the country’s debt to manageable levels.
A decision on disbursing the country’s next tranche of aid, worth EUR31.5 billion, was expected Tuesday.
Elsewhere on the Comex, silver for December delivery soared 2.35% to trade at USD33.12 a troy ounce, while copper for December delivery surged 2.34% to trade at USD3.532 a pound.