Gold rose more than 1% on Monday after disappointing manufacturing data from the United States and China pummelled Wall Street, while jitters about emerging markets bolstered an investor flight to safety.
The Institute for Supply Management data showed growth in U.S. manufacturing slowed sharply in January on the back of the biggest drop in new orders in 33 years, while growth in China's manufacturing sector slowed to a six-month low.
Bullion had gained for most of January until last week's 2-percent pullback, underpinned by weakness in global equities on concerns over plunging assets in emerging economies.
"In view of the significant currency depreciations in the emerging economies, gold is likely to remain in relatively high demand," said Eugen Weinberg, head of commodities research at Commerzbank.
Spot gold was up 1.1 percent at $1,256.71 an ounce at 3:24 p.m. EST (2024 GMT), after having jumped to a high of $1,266.10.
U.S. gold futures for February delivery settled up$20.10 at $1,259.90 an ounce.
In the five minutes after the release of ISM data at 10 a.m. (1500 GMT), about 15,000 lots, or one-fifth of trading volume at the time, changed hands.
Total turnover was 130,000 contracts, around 30 percent below its 30-day average, preliminary Reuters data showed.
Caution over emerging markets, the U.S. economy and the Federal Reserve's move to taper its stimulus program remain crucial to the metal's moves in the short term, analysts said.
"There is a bit of deterioration in risk appetite, which has given support to gold," ABN Amro's Georgette Boele said.
"But in the long run, a stronger dollar and better U.S. economy should drag gold prices lower and the strength we are seeing at the moment should still be regarded as a selling opportunity," Boele said.
The S&P 500 equities index tumbled 2.4 percent, while the U.S. dollar fell 0.4 percent against a basket of major currencies.
Focus will now turn to Friday's U.S. nonfarm payrolls report.
Markets in China, the world's biggest buyer of bullion, are closed until Friday, while Hong Kong, a major trading hub, was shut on Monday for the Chinese New Year holiday.
Among other precious metals, silver rose 1 percent to $19.30 an ounce, while palladium eased 0.3 percent to $698.75 an ounce.
Platinum was up 0.3 percent at $1,379 an ounce, with wage talks between South Africa's AMCU union and the top three platinum producers set to continue this week.
Platinum group investors also digested news that four of the top five U.S. auto sellers blamed extreme winter weather for disappointing sales in January, as analysts and executives predicted a rebound in February and March.
(By Frank Tang and Clara Denina; Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy, David Goodman, Peter Galloway and James Dalgleish)