Gold rose on Monday as investors' appetite for riskier assets faded on concerns about a potential US recession and decelerating global growth, increasing appeal for the bullion alongside yen and bonds.
Spot gold was up 0.2 per cent at $1,316.11 per ounce as of 0422 GMT, while US gold futures gained 0.3 per cent to $1,315.80 an ounce.
The metal last week posted its third consecutive weekly gain and rose 1 per cent, the most since the week ended Feb. 1.
Investors dumped shares and fled to the safety of bonds, while the Japanese yen hovered near a six-week high.
"Market is in a risk aversion mode. It seems that the data from Friday night, of US and Europe, didn't come as expected," said Michael McCarthy, chief market strategist, CMC Markets.
Data on Friday showed that US manufacturing activity unexpectedly cooled in March and businesses across the euro zone performed much worse than expected this month, fanning concerns on global growth.
"If data continues to be as weak as forecast then there is very good chance we could see significant higher gold prices," McCarthy said, adding that the inversion of yield is a sign of concern.
Yields on benchmark US 10-year treasury notes fell further below three-month rates in Asia, an inversion that has in the past signalled the risk of economic recession. The yield curve inverted on Friday for the first time since mid-2007.
Lower yields reduce the opportunity cost of holding non-yielding gold and weigh on the dollar. A weaker dollar makes bullion cheaper for non-US investors.
Chicago Federal Reserve Bank President Charles Evans said on Monday that it is a good time for the US central bank to pause and adopt a cautious stance, adding that he did not expect any interest rate hikes until the second half of next year.
"Gold is set to make another run for the $1,350 price level that has proved resilient," OANDA said in a note.
"Volatility fuelled by uncertainty and with plenty of Fed speakers expected to reinforce the dovish rhetoric from the central bank, the US dollar will be limited on the upside."
Indicating appetite for the safe-haven bullion, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose about 1 per cent in the previous week.
Investors also raised their bullish wagers in COMEX gold in the week to March 19, the US Commodity Futures Trading Commission (CFTC) said on Friday.
Among other precious metals, palladium slipped 0.1 per cent to $1,563 per ounce.
Silver gained 0.3 per cent to $15.46, while platinum was up 0.6 per cent at $848.78 an ounce.
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