Gold climbed to its highest in more than a week on Thursday, boosted by prospects of more central bank buying after a recent steep sell-off in the precious metal, while a firmer euro also underpinned prices.

Central bank purchases and surging physical demand helped gold bounce from a two-year trough around $1,321 an ounce hit last week, dealers said. But daily outflows from exchange-traded funds reflecting sagging investor confidence capped gains.

Russia and Turkey raised their gold reserves in March, the International Monetary Fund said on Wednesday, increasing their holdings ahead of the spectacular plunge in prices this month that shocked ardent gold investors and bulls.

Gold reversed early losses and stood at $1,444.71, up $13.91. It hit a high of $1,446,71 an ounce earlier in the session, its loftiest since April 15 - the day it posted its biggest ever daily drop in dollar terms.

"If the price breaks above $1,447-$1,450 levels, there will be more upward momentum. If it doesn't, we may see a further dip in gold prices," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.

"On hindsight, there might be some central buying too to support prices."

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.38 per cent to 1,092.98 tonnes on Wednesday - its lowest since late 2009 - from 1,097.19 tonnes on Tuesday.

Bullion is torn between a rise in demand for jewellery and coins, and investors in exchange-traded funds cutting exposure as they became increasingly convinced the US Federal Reserve will look to end its bullion-friendly bond-buying programme by the end of 2013 or beginning of 2014.

US gold futures for June delivery rose more than 1 per cent to as high as $1,446.50, its highest since April 15.

"Physical buying has been strong but the question is where these buyers are coming from? There could be a fundamental shift from commercial buying of paper assets into physical gold. If that's the case, gold prices may continue to go up," said Liu at Phillip Futures.

"But then I suspect, it's most likely the buyers are retail investors who don't know much about gold's personality and behaviour. If that's the case, how long can this physical buying sustain?"

Premiums for gold bars soared to multi-year highs in Asia after a spate of physical buying ran down supplies, with dealers in top consumer India expecting a surge in imports this month.

Indians celebrate Akshaya Tritiya festival next month, a time considered auspicious to buy gold. The wedding season is also underway. Gold is a popular gift at weddings and festivals in India.

In other markets, the euro bounced back against the dollar, making dollar-prices gold cheaper for holders of other currencies, while shares edged higher on views the recent run of weak global economic data will encourage major central banks to keep or deepen their monetary stimulus. - Reuters