The yellow metal that paled against shining US job data over the weekend is making a comeback on dollar weakness from a dovish Fed commentary, market data suggests.
Gold could continue to strengthen as the US shutdown drags onand Washington budget talks meander, some analysts say.
The bullion hit a six-month peak early on Monday in Indian markets and looked like gaining on it further on Tuesday.
Havens like palladium also hit an all-time high as the market suffered from a prolonged deficit due to the demand-supply dynamics. The metal that finds d mainly in automobile emissions-reducing devices is trading at a premium to gold.
Spot gold was 0.3 per cent at $1,288.02 per ounce as of 5.18 pm GMT, having reached $1,298.42 an ounce on Friday, its highest since June 15. US gold futures gained 0.3 per cent to $1,289.40 per ounce.
"The market is reconsidering its expectations for Fed rate hikes and as the expectations have been scaled back gold prices have been able to edge higher," Suki Cooper, precious metals analyst at Standard Chartered Bank, told Reuters.
US Fed chief Jerome Powell on Friday said the US central bank would be more sensitive to markets' downside risks, adding that it could change its policy stance if needed.
The precious metal traditionally gains when interest rate hikes expectations weaken because lower rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, in which it is priced, according to experts.
"As the trade tensions have eased we've seen the dollar weaken somewhat and in turn, gold prices have been able to benefit," Cooper said.
The US and China are likely to enter a good settlement over immediate trade issues, US Secretary of Commerce Wilbur Ross has said, buoying expectations.
"The main trend remains bullish (for gold). From a technical point of view, traders are now watching the two key levels of $1,277 and $1,300, which are new support and resistance levels respectively," ActivTrades chief analyst Carlo Alberto De Casa said in a note.
Investor appetite for gold can be seen in the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, which rose to 798.25 tonnes, the highest since July 31, 2018, according to reports.