Gold rose on Monday as a slide in the dollar made bullion more attractive for holders of other currencies, while some investors took cover as stocks globally slipped into the red ahead of the US Federal Reserve's two-day policy meeting.
Palladium climbed to an all-time high of $1,269.50 on a prolonged deficit in the market and increased speculative interest, with prices trading at a premium to bullion.
Spot gold was up 0.6 percent at $1,244.91 per ounce by 12:42 p.m. EST (1742 GMT). The metal touched its lowest since Dec. 4 at $1,232.39 an ounce on Friday.
US gold futures were 0.5 percent higher at $1,247.90 per ounce.
The dollar slipped ahead of the Fed's policy meeting, ending on Wednesday. Investor focus will be on the central bank's policy outlook for 2019 and future interest rate hikes.
"One of the drivers that is pushing gold higher right now is the flight to safety (due to lower equities), along with the dollar being sold-off a bit," said Michael Matousek, head trader at US Global Investors.
"Some traders are also positioning themselves so that if the Fed does not raise rates, gold might spike."
Weak stock markets and slowing global growth have raised speculation that the Fed will need to pause its tightening cycle or risk harming the US economy.
Investor sentiment toward gold showed signs of optimism.
Speculators switched to a net long position in gold of 10,252 contracts, adding 11,791 contracts in the week to Dec. 11, data showed on Friday.
This was the first time gold speculators have held a net long position since July, and the strongest since June.
"With increased volatility and geopolitical risk, macro asset allocation is becoming more gold-positive again, while we believe much of the dollar's upward move is now behind us with rate hike expectations dropping," analysts at BMO Capital Markets said in a note.
Silver was up 0.7 percent at $14.66 per ounce, while platinum rose 1.2 percent at $796.80 per ounce.
Spot palladium was 1.6 percent higher at $1,257.80 per ounce, having hit an all-time record high earlier in the session.
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