Gold settled nearly 2 percent higher on Monday after a worse than expected U.S. manufacturing report weighed on the dollar and global equities, while persisting concerns about emerging markets bolstered some investor flight to safety.
The Institute for Supply Management (ISM) said its index of national factory activity fell to its lowest level since May 2013 at 51.3 last month, from a recently revised 56.5 in December.
Spot gold jumped to a session high of $1,266.10 an ounce and was last up 1.3 percent to $1,257 an ounce.
Bullion snapped five weeks of advances last week, falling 2 percent, but posted a 3.2 percent gain in January for the first monthly increase in five, owing to weakness in global equities gripped by concerns over emerging economies.
U.S. gold futures for April delivery settled 1.6 percent higher at $1,259.90 an ounce.
Emerging markets, economic growth in the United States and the U.S. Federal Reserve's move to taper monetary stimulus remain crucial to the metal's moves in the short term, analysts said.
"There is a bit of deterioration in risk appetite, which has given support to gold," ABN Amro's Georgette Boele said. "But in the long run, a stronger dollar and better U.S. economy should drag gold prices lower and the strength we are seeing at the moment should still be regarded as a selling opportunity."
The dollar index, which recorded its best monthly gain in eight months in January, extended losses to 0.3 percent against a basket of currencies after the U.S. data.