Gold rose to a one-month high on Monday as fresh losses in U.S. equities triggered safe-haven buying and extended the previous session's bullion rally sparked by lackluster U.S. nonfarm payrolls data.
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The metal posted its third consecutive daily rise and accelerated gains as the S&P 500 equities index fell more than 1 percent as investors awaited company earnings.
Analysts said gold's 4 percent gain year-to-date was supported by a drop in equities early in 2014 following a record run-up in stocks last year.
"There was some follow-through buying from Friday's job report and rotation from equities to gold," said Frank McGhee, head precious metals dealer at Chicago commodities brokerage Alliance Financial LLC.
"At some point, gold's rally is going to fade" because of an improving economic outlook, McGhee said.
Spot gold was up 0.5 percent to $1,252.84 an ounce by 2:56 p.m. EDT (1915 GMT), having earlier hit a one-month high at $1,254.50.
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On Friday, gold rallied 1.5 percent after disappointing U.S. jobs data stirred speculation the Federal Reserve will take a gradual approach to tapering its bond-buying stimulus this year.
U.S. COMEX gold futures for February delivery settled up $4.20 an ounce at $1,251.10, the contract's highest close since Dec. 11.
Trading volume was about 40 percent below its 250-day average, preliminary Reuters data showed.
COMEX gold options floor trader Jonathan Jossen said that large option traders were selling straddles to capture the premiums as they expect gold prices to stay rangebound in the near term.
Straddle is an option strategy involving buying one call option and one put option with the same strike and same expiry date. Its value tends to rise when volatilities are increasing.
Bullion largely shook off early losses stemming from the U.S. investment bank Goldman Sachs' forecast of a year-end price target of $1,050 for gold, putting the yellow metal on course for a 15 percent loss from current levels.
In supply news, gold production in China rose 7 percent from a year earlier to reach 392.141 tonnes in the first 11 months of 2013, data from the China Gold Association showed on Monday.
Among other precious metals, silver rose 1.2 percent to $20.36 an ounce.
Platinum prices were underpinned by supply worries after South Africa's Association of Mineworkers and Construction Union (AMCU) said on Monday its workers had voted in favor of a strike over wages at Impala Platinum (Implats), the world's second-largest producer of the metal.
Platinum rose 0.3 percent to $1,438.24 an ounce and palladium lost 0.2 percent to $737.22 an ounce.
(By Frank Tang and Jan HarveyAdditional reporting by Clara Denina in London; Editing by Dale Hudson, Keiron Henderson, Andrew Hay and Meredith Mazzilli)