Gold rose to its highest in two weeks as political turmoil and weak economic data in the United States reduced expectations of aggressive interest rate rises this year, pushed down U.S. bond yields and drove the dollar to its lowest in six months.
Lower yields reduce the opportunity cost of holding non-yielding gold, while a weaker dollar makes bullion cheaper for non-U.S. investors. Higher interest rates would push yields up and likely boost the dollar.
Spot gold climbed 1.86 percent to $1,259.40 per ounce, after earlier touching its strongest since May 3 at $1,248.70.
U.S. gold futures for June delivery were up $22.30 to settle at $1,258.70 an ounce. Gold crossed above both its 50-day moving average level of $1,247.40 and its 200-day level of 1,250.70, trading above both averages on an intraday basis for the first time since May 3.
"Downward movement in yields and the dollar have given support to gold," ABN AMRO analyst Georgette Boele said. "And on top of this you get political uncertainty which is denting the dollar."
President Donald Trump is under pressure to explain whether he tried to interfere with a federal investigation after reports that he asked then-FBI Director James Comey to end a probe into his former national security adviser Michael Flynn.
That follows a turbulent week after Trump fired Comey and discussed sensitive national security information with Russia's Foreign Minister.
This has led investors to question whether Trump can push through tax cuts and deregulation and fueled demand for safe-haven assets including gold.
The dollar fell to its lowest since Trump was elected in November and is likely to drop further, Boele said. Stocks fell and ten-year U.S. bond yields were at the lowest level since April 21.
An unexpected fall in U.S. homebuilding, meanwhile, added to a run of weak economic data, raising new doubts about how many times the Federal Reserve will raise interest rates this year.
Futures traders are pricing in a 71 percent chance of a June rate rise, down from around 90 percent earlier this month, according to CME's FedWatch Tool.
On the technical side, gold broke above resistance at its 200-day moving average and Fibonacci retracement, both at around $1,245, triggering technical buying.
If gold can hold above that level it could rise to its long-term downtrend line at $1,287 an ounce, said technical analysts at Commerzbank.
Gold imports to major consumer India will however drop back sharply later in the year following a strong first quarter, the World Gold Council said on Wednesday.
Among other precious metals, was up 0.83 percent at $16.96 per ounce.
rose 0.75 to $944.49 per ounce. Palladium fell 1.88 percent to $778.60.