London: Gold hit a three-week high 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 percent to new 5-1/2 year lows.
That prompted investors to buy assets perceived as offering safety, such as U.S. 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 0.4 percent at USD 1,208.30 an ounce at 1244 GMT, having earlier touched a peak of USD 1,214.40, its highest since Dec. 16. The metal rose 1.3 percent 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 USD 4.40 an ounce at USD 1,208.40. Gold priced in euros hit its highest since Sept 2013 at 1,019.15 euros an ounce, benefiting from a 0.3 percent drop in the euro versus the dollar.
Holdings in the world`s largest gold-backed exchange-traded fund, SPDR Gold Shares, rose 0.25 percent 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 USD 5-USD 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 0.1 percent at USD 16.15 an ounce. Platinum was up 0.5 percent at USD 1,211.25 an ounce, while spot palladium was up 0.8 percent at USD 795.90 an ounce.
