Gold settled about 2 percent higher on Thursday as sharp losses in U.S. equities and disappointing Chinese manufacturing data boosted bullion's safe-haven appeal.
Gains in the metal's price accelerated after it rose above key technical resistance at $1,260 an ounce, a level where it had repeatedly failed. The U.S. dollar's tumble following a strong manufacturing report in the euro zone also lifted gold prices to a nearly two-month high.
Bullion investor sentiment was lifted after manufacturing data in China showed that a mild slowdown at the end of 2013 in the world's second-largest economy had continued into the new year.
"Market participants were ready to sell their equities holdings and to add to their gold positions on the weaker-than-expected Chinese data," said Carlos Sanchez, a portfolio manager and director of commodities and asset management at CPM Group in New York.