February delivery gold rose $4.90, or 1 percent, to finish at $510.10 an ounce at the New York Mercantile Exchange's Comex division, after moving from $505.30 to $510.70.
Futures climbed on technical buying in thin trading after finding support last week on bargain hunting down closer to $490 an ounce. "The market has held and just rallied up, and technically it just looks good," said a dealer in New York.
But with trading closed on Tuesday in London, most of Europe, and also Hong Kong, liquidity was relatively low and the market awaited the return of more dealers on Wednesday.
"I think we are in a range of $503 to $510 for the rest of the week and then we'll see what the new year brings," said Leonard Kaplan, president of Prospector Asset Management.
Kaplan said he viewed major resistance up at $513 to $515. Spot gold was at $507.50/508.30, up from $502.60/3.40 at Friday's New York close.
There was no London fix by bullion dealers due to a long holiday weekend.
Bullion, used in jewellery and for investment, reached its loftiest level in almost 25 years on December 12, at $540.90, as funds diversified into precious metals on worries about rising energy costs and economic and geopolitical uncertainty.
Analysts have said fundamentals remain positive for gold and investors are keen to diversify with more commodities. Many expect gold to target December's near 25-year Comex high at $544.50 in 2006.
Commitments of Traders data from the Commodities Futures Trading Commission on Friday showed the fund net long position in Comex gold futures inched down to 156,170 lots as of December 20 from 156,331 lots a week.
Last week, news that Barrack Gold Corp had sealed a sweetened deal to buy Placer Dome Inc for $10.4 billion, turning the two Canadian miners into the world's largest gold producer, supported the market, dealers said.
Gold trading in New York and London will again be shut on Monday, January 2, for the New Year's holiday. March silver rose 16.7 cents to finish at $8.812 an ounce, trading from $8.64 to a two-week high of $8.82.
CFTC said the fund net long position in silver futures slipped to 60,976 lots from 62,787 lots the week before. Spot silver was at $8.71/74, from $8.55/58 on Friday. Nymex January platinum edged up 10 cents to $965.40 an ounce. Rollover by speculators into next active April futures from January platinum was heating up before first notice day for delivery next week.
Spot platinum last traded up at $965/969 an ounce. March palladium gained 45 cents to finish at $258 an ounce. Spot stood at $255/259.