Gold rose more than 1 percent on Monday as weaker than expected U.S. data and uncertainty about how fast the Federal Reserve will tighten interest rates next year weighed on the dollar.
A renewed slump in crude oil to its lowest levels since 2004 was seen as curbing gold's ascent in the near term. The metal is usually seen as a hedge against oil-led inflation.
Spot gold was up 1.18 percent at $1,078.43 an ounce, following a 1.4 percent gain on Friday. Gold futures for February delivery settled up 1.5 percent at $1,080.60 an ounce.
Liquidity is expected to drop as trading enters the last two weeks of the year, when many will be away from their desks for the Christmas and New Year holiday season.
"(A) good short-covering rally continues for the short holiday week," said George Gero, precious metals strategist for RBC Capital Markets in New York."
The double bottom of the Dec. 3 (low) below $1,050 may become a technical factor."
The metal saw bids on Monday as the dollar fell after data from the Chicago Federal Reserve suggested that the U.S. economy grew at a below average pace in November before the U.S. central bank raised interest rates last week.
"We understand the bearishness before the start of the interest rate hiking cycle," Commerzbank analyst Eugen Weinberg said, adding that the metal was unlikely to fall further in the short term as the first rate rise was out of the way.
However, the outlook for the dollar remains strong on higher U.S. rates.
"The dollar will continue to be a drag for gold next year," Deutsche Bank analyst Michael Hsueh said.
"We have a view that we'll get 3 to 4 25-basis point U.S. rate hikes in 2016, bringing the 10-year real rate lower, although ... the yield curve is expected to ease a bit, but still not making it easy for gold," he added. "We are targeting $980 for the fourth quarter next year."
The benchmark 10-year U.S. Treasury yield steadied at 2.2 percent. As gold pays no interest, firm returns from U.S. bonds and other markets is seen as negative for the metal.
Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, rose 2.98 percent to 648.92 tonnes on Friday, the first increase in two months.
Total holdings had fallen to a seven-year low last week.
Silver rose 1.6 percent to $14.29 an ounce, while palladium dropped 0.4 percent to $553 and platinum gained 1.5 percent to $871.