Gold edged up to near a three-week peak on Monday, supported by expectations U.S. monetary policy will remain ultra-loose, while investors also bought the metal as a hedge against a looming U.S. fiscal crisis.
Gold added 0.29 percent to $1,735.86 by 1432 GMT, holding near the three-week high around $1,738 struck on Friday and well above a two-month low around $1,672 hit last week.
U.S. COMEX gold futures for December were up 0.21 percent at $1,734.60 an ounce.
World shares, with which gold is often correlated, stabilised on Monday after three straight sessions of losses as firmer Chinese data helped to offset concerns about a possible U.S. fiscal crisis and delays to an instalment of Greek aid.
"The gold price is up because of a combination of the outlook for an expansionary U.S. monetary policy and fears over the 'fiscal cliff'," said Eugen Weinberg, global head of commodities research at Germany's Commerzbank in Frankfurt.
"Concerns over inflation in the longer term are a factor," he added.
He said gold prices could rise further and potentially break above a peak near $1,800 an ounce in the next few weeks.
Peter Fertig, a consultant with Quantitative Commodity Research, said a continuing relaxed U.S. monetary policy was underpinning the gold market.
"It is currently the quantitative easing factor that is providing support to gold, because other fundamental factors have been negative," Fertig said.
He argued that a potential positive for gold in coming weeks would be an improvement in the global economy and a resulting rise in stock markets and investors' appetite for risk.
"There is potential for further upside in gold prices, but it crucially depends on how Wall Street will react," he said. "If economic data in coming weeks comes in stronger than expected, we could see a re-test of the early-October highs near $1,800."
A slowdown in China has darkened the prospects for the economy in recent months, but there has been hope in the euro zone's progress in easing its fiscal worries and the prospect of a U.S. recovery next year.
President Barack Obama will meet business, labour and civic leaders this week ahead of talks with Congress on a deal to head off nearly $600 billion worth of tax hikes and spending cuts that could derail the U.S. recovery.
Broker Marex Spectron said in a daily market report, "Recently gold has veered between attempting to be a safe haven and on the flip side reacting in tandem with the euro, other commodities and the stock market.
"Until it conclusively decides what it really is, the range trading will continue."
Gold rallied to $1,795, an 11-month high, on Oct. 5 after the U.S. Federal Reserve pushed ahead with another round of monetary stimulus.
At the London Bullion Market Association (LBMA) conference in Hong Kong, the president of the Shanghai Gold Exchange told Reuters the bourse would launch an interbank market early next month that would start with spot contracts and gradually offer forward contracts.
At the same conference, the general director of the People's Bank of China, Xie Duo, said the central bank had not set a time-frame on issuing more gold import licenses to banks but was keen to further open up the market to the international community.
Last week, the global head of metals at consultancy Thomson Reuters GFMS said he expected China's gold demand to grow 1 percent this year to a record of around 860 tonnes, which means the country would overtake India as the world's biggest consumer of gold for the first time on a yearly basis.
Gold prices may hit $2,000 an ounce in 2013 as costs and barriers to production restrict supply, while demand from central banks and Chinese consumers keeps climbing, the world's biggest gold producer said on Monday.
China's leading gold miner, Zijin Mining Group , sees output flat in 2013 after an expected rise of nearly 5 percent this year as falling production at its top mine is offset by growth elsewhere, a company official said on Monday.
Anglo American Platinum (Amplats) has extended the deadline to Wednesday for striking workers at several of its South African mines to accept its latest offer aimed at ending two months of wildcat action.
Spot platinum traded up 0.81 percent to $1,562.49 an ounce. Spot palladium was up 0.84 percent at $608.97 an ounce.
Silver eased 0.15 percent to $32.53 an ounce.