Gold reached a high of $257.75/258.05 on buying from Australian dealers and Japan, although Japanese selling later in the day when TOCOM closed trimmed the gains, traders said. "Some people were covering their forward short positions. Borrowing costs are high. You pay a high cost to short gold," a trader said.

High rates for leasing gold also made producer forward selling into price rallies less profitable. The six-month gold leasing rate rose to 4.04 per cent and the 12-month rate was 3.76 per cent. Dealers said the market showed little reaction to the latest chapter in the IMF gold sale saga.

On Monday an official said the International Monetary Fund was seeking ways to pay for debt relief for the poorest countries without resorting to selling gold reserves.

But gold sales could not be ruled out, deputy managing Director Stanley Fischer said, adding that a decision was expected in a matter of months.

In Tokyo gold futures ended mixed after rising earlier on strong physical prices. Spot silver ended at $5.29/32 an ounce after closing in New York at $5.31/34 on Monday.

Local tael gold ended unchanged from the previous close at HK$2,374.

The carry over charge at the Chinese Gold and Silver Exchange Society was -3, up from its previous fix at -3.1.