On Tuesday, US government released November data for housing sector which hit their highest level since April 2010.
Germany, the Europe's largest economy ruled out the sign of recession by presenting better-than-expected December readings of business and consumer confidence.
Markets were also aided by a successful Spanish bond auction.
There was a spark of enthusiasm overall on all the markets, driving equities and commodities higher with the rise in risk appetite.
Gold with other commodities edged higher on Wednesday. The metal was also supported by the fall in US dollar due to its inverse relationship with the greenback.
Euro rose by more than 1% against the dollar.
International spot gold rose and was seen trading at US $1,628 a troy ounce.
Back to India, at the Multi-Commodity Exchange (MCX), gold for February delivery contract opened at Rs 27,920 per 10 grams and was seen trading at Rs 28,026 – Rs 28,027 per 10 grams at 1:20 pm IST.
Domestic bullion prices also reflected a rise with 24 carat gold seen at Rs 28,050 per 10 grams and 22 carat gold at Rs 26,220 per 10 grams.
Gold traders magnified their long positions with the sudden spike in prices with small volumes considering this hike can be for an interim period.