Spot gold was up 0.3 per cent at $ 1,560.89 per ounce by 0726 GMT, after touching its highest since Jan. 10 at $ 1,562.51 earlier in the session. US gold futures were flat at $ 1,560.50.
“Chinese New Year is in front of us and some buying has emerged because of that,” Ajay Kedia, director at Kedia Advisory in Mumbai, said.
“The market is also going up because of central bank buying, geopolitical risks such as Yemen missile attack – all these factors are supporting gold.”
Iran-aligned Houthis attacked a military training camp in the Yemeni city of Marib on Saturday, killing dozens of people.
Gold is considered a safe investment in times of political and economic uncertainty.
“Investors are clearly focused on the longer term dynamics, which should play in gold’s favour with low interest environment, central banks’ loosening policy to help support growth and subsequent weakness in the dollar,” ANZ analyst Daniel Hynes said.
The US Federal Reserve will meet for its first policy meeting of the year later this month, where it is widely expected to keep interest rates unchanged.
The central bank cut interest rates three times last year before deciding in December to stand pat. Lower interest rates encourage the buying of non-interest-paying bullion.
However, limiting gold’s advance, Asian stocks held close to a 20-month high, supported by an extended rally in global stocks on Wall Street and solid US economic data.
US homebuilding surged to a 13-year high last month as activity increased across the board, while production at factories increased for a second straight month, data showed on Friday.
Trading volumes were low with US markets closed for a holiday.
Spot gold may test a resistance at $ 1,564 per ounce, according to Reuters technical analyst Wang Tao.
Speculators cut their bullish positions in COMEX gold contracts in the week to Jan. 14, data showed.
Holdings of the world’s largest gold-backed exchange-traded fund SPDR Gold Trust rose 2.20 per cent to 898.82 tonnes on Friday, their highest since Nov. 11.
Palladium advanced 0.9 per cent to $ 2,502.00 an ounce, after the auto-catalyst metal hit a record high of $ 2,537.06 on Friday.
Silver rose 0.4 per cent to $ 18.07, while platinum jumped 0.8 per cent to $ 1,026.53.