By Clara Denina
LONDON (Reuters) - Gold rose more than 1 percent on Wednesday, benefiting from a weaker dollar and ailing European shares, which slid to their lowest since October 2014 as oil prices continued their relentless slump.
However, slow physical demand from Asia kept the metal well below this month's peak, traders said.
Spot gold climbed to a session high of $1,099.10 an ounce and was up 1.1 percent at $1,098.76 an ounce by 1253 GMT. U.S. gold for February delivery gained 0.9 percent to $1,098.90 an ounce.
Risk appetite soured as fresh 12-year lows in Brent crude prices raised worries about the global economy.
Asian stocks slid to a four-year trough and European mining and energy share indices touched their lowest level in more than 12 years.
Gold, often seen as an alternative investment during times of financial uncertainty, benefited from the risk-averse sentiment in the market along with other safe-haven assets such as the Japanese yen.
"The precious metal has abutment from traders because their appetite to hold riskier assets has dissipated," said Naeem Aslam, chief market analyst at AvaTrade.
"The ongoing weakness in Chinese growth could (help send) the metal above the $1,100 mark."
The International Monetary Fund cut its global growth forecasts for the third time in less than a year after China's economy grew at its slowest rate in a quarter of a century in 2015.
"Gold's safe-haven rationale is back in vogue," Citigroup analysts said in their 2016 commodities outlook, amid fears over the Chinese economy, weak equity markets and geopolitical tensions in the Arabian Gulf.
Gold had scaled a two-month high of $1,112 an ounce on Jan. 8, as investors worried about how Chinese authorities would manage a slowdown in economic growth.
China is the world's biggest consumer of the metal at more than 1,000 tonnes annually and although an economic slowdown would generate speculative demand for gold as a low-risk asset, analysts say it could also weigh on Asian physical consumption.
There is a modest premium to world gold prices in China, while prices in India, the second-largest gold consumer, are at a discount to the global benchmark, HSBC analyst James Steel said.
"The $1,100/oz is a stiff resistance level, however, and while we believe it will be overcome, it may take some time," he said.
Spot silver was up 0.8 percent at $14.13 an ounce and palladium slipped 1.1 percent to $487.30. Platinum, which touched a seven-year low of $812.95 an ounce on Monday, dropped 0.8 percent to $820.
(Additional reporting by Manolo Serapio Jr. in Manila; Editing by Dale Hudson and Susan Fenton)
