OREANDA-NEWS. February 05, 2015. Gold rose on Wednesday, reversing a 1 percent in the previous session, as European share prices dropped and China's central bank moved to make more money available for lending to help stimulate its flagging economy.

To do this the central bank cut the amount of cash that banks must hold as reserves, the first industry-wide cut since May 2012.

Spot gold was up 0.6 percent at \\$1,266.85 an ounce by 1242 GMT, after posting its fourth drop in five sessions, down 1.2 percent, on Tuesday.

"Gold's rally this year has partly been based on this premise that central banks are losing their fight against slower growth and deflation and are having to take even more radical monetary policy measures and this plays into that narrative," Macquarie analyst Matthew Turner said.

"But it's also because China is a huge consumer of gold and economic growth should boost demand. That said we're really talking about impact on the margin."

Further monetary easing favours gold as ultra-low interest rates encourage investors to put money into non-interest-bearing assets instead. But while major economies such as China and Europe continue to pump more money into their systems, the United States is moving towards a tightening cycle.

Spot prices have largely retreated from a five-month peak of \\$1,306.20 on Jan. 22, paring the metal's year-to-date gain to less than 7 percent.

U.S. gold for April delivery also rose 0.6 percent to \\$1,267.40 an ounce.

Gold rose in spite of a stronger dollar, which was 0.1 percent higher against a basket of leading currencies, helped by a jump in U.S. Treasury yields.

Investors will have more economic data to digest later on Wedenesday, with the monthly ADP private payrolls and ISM non-manufacturing figures due to be published. On Friday, U.S. non-farm payrolls employment data will be released.

"The U.S. data this week is part of the big picture. If the figures surprise on the upside they could add to the view that the Fed will hike rates in June," Natixis analyst Bernard Dahdah said.

In other markets, European share prices dipped and the euro's exchange rate eased after optimism regarding a possible debt deal for Greece cooled.

Greece's new government dropped calls for a write-off of its foreign debt and instead proposed official creditors swap debt for growth-linked bonds.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, slipped to 24.59 million ounces on Tuesday from 24.65 million ounces the day before, which was the highest level since October.

Spot silver rose 0.4 percent to \\$17.34 an ounce. Palladium gained 1 percent to \\$789.50 an ounce and platinum was up 0.8 percent at \\$1,239.95 an ounce.