Prices of the yellow metal was up to its highest peak in over a week Monday, following a missile attack in Yemen that sparked geopolitical tensions and lifted gold's safe-haven status.
Gold's price rally also got a boost from strong buying ahead of the Chinese New Year celebrations.
Spot gold rose 0.3 percent at $1,560.89 an ounce, after hitting its highest mark since January 10 at $1,562.51. American gold futures remained unchanged at $1,560.50.
According to Mumbai Kedia Advisory chief Ajay Kedia, the Chinese New Year is "in front of us and because of this, some strong buying has emerged."
Ajay added that the market is also rallying as a result of buying from central banks, geopolitical issues like the Yemen missile attack, key factors that lift the value of gold.
On Saturday, Iran-backed Houthi militia attacked a military training outpost in Marib, Yemen, killing dozens of people. During periods of economic instability and political tensions, the precious metal is considered as the best asset to invest in.
ANZ market strategist Daniel Hynes noted that investors have obviously set their minds on the long-term factors that are expected to favor gold, with low interest environment, loosening policy by central banks to help support growth and subsequent dollar weakness.
The US central bank will meet later this month for its first policy meeting, where interest rates are mostly anticipated to remain fixed.
The Federal Reserve trimmed down its interest rates three times in 2019, before deciding to keep its rates unchanged in December. Lower rates stimulate the buying of non-interest paid gold.
Limiting gold's rally, however, have allowed Asian stocks to hold close to a 20-month high, supported by an extended global stock rally on Wall Street and solid US economic figures.
US homebuilding was up to a 13-year peak in December as activity accelerated across the board, while manufacturing output climbed for a second consecutive month, data showed. Trading volumes were small with US markets closed for a holiday.
Based on figures by Reuter's technical analyst Wang Tao, spot gold can test a resistance at $1,564 per ounce.
In contrast, speculators in the week to January 14 cut off their bullish positions in COMEX gold futures, data showed.
Holdings from the world's largest gold-backed exchange-traded fund SPDR Gold Trust advanced 2.20 percent on Friday to 898.82 tons; they're highest since November 11.
Meanwhile, palladium rose 0.9 percent to $2,502.00 per ounce, after the metal notched a record high of $2,537.06 late Friday.
