Gold saw its biggest daily surge in more than a year on Monday, reversing from 2 per cent losses to a one-month high on spillover support from the surging oil market, technical buy signals and potential for increased Indian imports. Silver vaulted nearly 9 per cent.

The rally followed a thinly traded move lower, viewed by traders as overdone, after Switzerland voted on Sunday against a proposal to boost its gold reserves.

Spot gold was up 4.2 per cent at $1,216.34 at 12:29 p.m. EST (1729 GMT), its biggest daily surge since September 2013. US COMEX gold futures for December delivery settled up $42.60, or 3.6 per cent, at $1,218.10 an ounce, also a one-month high.

Silver rallied on the coattails of gold, rising 6.9 per cent at $16.47 an ounce, having earlier rallied as much as 8.8 per cent to a peak of $16.76.

"They did get rather oversold at the end of last week so there were heavy short positions in both markets," said James Steel, chief metals analyst for HSBC Securities.

Gold received support from the physical markets and from India, the second-biggest gold consumer, which eased curbs on imports on Friday. In top consumer China premiums were steady at about $1-2, reflecting strong buying interest.

However, trade sources said the unexpected move by India's central bank to ease curbs on overseas purchases does not mean there will be a jump in imports.

Also bullish was the price reversal in oil prices which rallied around 4 per cent, traders said.

"Selling appetite was there, but as it turned out, they were not prepared to hang on to the conviction for that long," Saxo Bank's head of commodity research Ole Hansen said, referring to the session's earlier weakness.

Risk appetite was slack on wider markets, hurt by slowing factory activity in China and Europe, with global stock markets down. The yen briefly hit a seven-year low after Moody's cut its rating on Japan, stimulating some gold demand, traders said.

Platinum gained 3.4 per cent to $1,237.25 an ounce, while palladium turned down 0.4 per cent to $803.50 an ounce. – Reuters