Gold rallied more than 1 percent on Monday after U.S. President Donald Trump's failure to push through a healthcare reform package on Friday raised questions over his ability to deliver promised tax cuts and spending plans.
That knocked the dollar to a four-month low versus a currency basket and drove a drop in stock markets, with European indices sliding nearly 1 percent in early trade and U.S. stock index futures hitting six-week lows.
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Spot gold was up 1.1 percent at $1,257.72 an ounce at 1135 GMT, having touched a one-month high of $1,259.14 earlier in the session. U.S. gold futures for April delivery were up $9.30 an ounce at $1,257.80.
"Trump's spectacular failure to get his health bill through Congress raises concerns about his ability to achieve his goals on other policies," Saxo Bank's head of commodity research Ole Hansen said. "With stocks, the dollar and bond yields lower and geo-political risks on the rise, gold may stand out as the commodity of choice at such time."
Gold had already rallied sharply from its March 15 low following a less hawkish policy statement than expected from the Federal Reserve, which dampened expectations for near-term increases in U.S. interest rates. Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
The metal ran into resistance in earlier trade at its 200-day moving average, currently at $1,259 an ounce, a level that also halted last month's sharp price rally.
"If it were to rise lastingly above this threshold, we could see technical follow-up buying," Commerzbank said in a note. "That said, an attempt to exceed the 200-day moving average proved abortive at the end of February, causing the gold price to shed almost $70 in the subsequent days."
The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares , reported an outflow of 1.8 tonnes on Friday. U.S. Commodity Futures Trading Commission data showed on Friday however that hedge funds and money managers boosted their net long positions in COMEX gold in the week to March 21, after two weeks of cuts. China's net gold imports via main conduit Hong Kong rose 50.8 percent month-on-month in February to 47.931 tonnes, data showed.
Silver was up 1.1 percent at $17.91 an ounce, off an earlier three-week high of $17.959, while platinum was 1.7 percent higher at $976.95. Palladium was down 0.2 percent at $807.70, after hitting a two-year peak of $815.40 on Friday.
(Additional reportingBy Nallur Sethuraman in Bengaluru; Editing by Ruth Pitchford and Susan Thomas)