Spot gold rallied more than 1% and US gold futures as much as 4% on Tuesday

Spot gold rallied more than 1% and US gold futures as much as 4% on Tuesday, snapping four consecutive sessions of losses as a weaker dollar helped battered commodities stage a comeback.

Eurozone officials are working to magnify the firepower of the region’s rescue fund, European Central Bank policymakers said on Monday, boosting hopes the region will be able to staunch a sovereign debt crisis that threatens the world economy.

The news pushed the dollar down 0.6% against currency basket, making gold cheaper for holders of other currencies.

Spot gold gained 1.4% to $1,650.10 an ounce by 10:46 am IST, after sinking as much as 7% to a 7-1/2-month low near $1,530 on Monday in the widest daily swing on record.

US gold rose 3.7% to $1,653.50, headed for its biggest one-day rise since March 2009.

“In the last couple of days the market over-reacted to the situation in the eurozone and the US,” said Cameron Alexander, senior metals analyst at GFMS, a unit of Thomson Reuters.

Gold’s appeal as a safe-haven asset remains intact given the uncertainty in global growth and concerns about Europe’s sovereign debt, and strong investment demand is likely to push gold towards $2,000 by the end of the year, said Alexander.

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