Gold and silver futures rose to three-week highs after China cut benchmark interest rates to support economic growth, boosting demand for precious metals as a store of value. Palladium jumped the most in 14 months.

The rate reduction was the first since July 2012 as the Asian nation heads toward its slowest full-year expansion in almost a quarter century. Russia added to gold reserves in October, bringing holdings to the highest in at least two decades, International Monetary Fund data showed.

The metal has climbed 6 percent after touching a four-year low on Nov. 7 amid increased demand for coins and jewelry, combined with signs that nations are boosting reserves. Central banks may raise purchases by as much as 22 percent in 2014, the World Gold Council estimates.

“People will buy gold as a hedge, since it is clear that China wants to stimulate growth,” Miguel Perez-Santalla, a sales and marketing manager at Heraeus Metals New York LLC, said in a telephone interview. “Also, we are seeing a rise in physical demand.”

David Fuller's view

It has been a torrid time for gold and silver since mid-July and there was certainly some capitulation selling in late September and early July.

The upside key day reversals on November 7^th, marking the bottom to date for these two precious metals were impressive.  We saw another big upward dynamic a week later.  Both gold and silver have now seen their best rallies since June, suggesting more than short covering.

There is still plenty of competition from stock and bond markets but value buyers who view gold and silver as hard money are showing interest once again.  That is understandable against a background of low interest rates, quantitative easing and many central banks trying to lift inflation rates to at least 2%.