Gold rose for the second straight session on Tuesday after a wave of risk aversion due to growth worries in China and rising tensions in the Middle East triggered demand for the metal, despite the stronger U.S. dollar.
Spot gold was up 0.35 percent at $1,078.30 an ounce. On Monday, it rallied 2.2 percent to a four-week high of $1,083.30 after data showed Chinese factory activity contracted for a 10th straight month in December.
U.S. gold futures for February delivery settled up 0.3 percent at $1078.40 an ounce.
"More weakness in China ... would be more positive for gold but investors would need to see more evidence of systemic issues there, which is still unlikely," Julius Baer analyst Carsten Menke said.
"That could be the only longer lasting upside for gold in an otherwise bearish outlook due to sound growth in the U.S. and lack of inflation risks."