Gold surged as much as 2% on Monday to its highest level in more than six years as a worsening U.S.-China trade conflict prompted investors to dump riskier assets for safe havens, with a weaker dollar lending further fuel for bullion's run.
In the latest flare-up in a long-drawn trade spat, China on Friday said it would fight against a decision by U.S. President Donald Trump to slap an additional 10% tariff on $300 billion worth of Chinese imports.
"What is driving gold is fear of these tariffs and the fear of China retaliating," said Michael Matousek, head trader at U.S. Global Investors, adding that a host of uncertainties surrounding the global economy, an environment of negative bond yields and an ongoing currency war were making the case for gold.
"Gold is in a bull market and is going to trend higher. This is just a start of another wave going up. I would not be surprised to see gold hit the $1,500 level by November-December and keep it sustained there."
Trump's tariffs on China may force the U.S. Federal Reserve to cut interest rates more than it had hoped was necessary to protect the economy from trade-related risks.
"All this volatility, growth fears, persistent weakness in economic data will be good enough for a risk-off environment," said Benjamin Lu, an analyst at Phillip Futures.
The dollar slipped to near a two-week low against key rivals, making bullion cheaper for investors holding other currencies, but rose against the Chinese yuan. Trade worries also drove a selloff in global stock markets.
China let its yuan weaken below the seven-per-dollar level on Monday, an 11-year low, while the offshore yuan fell to its weakest since international trading of the Chinese currency began.
"This might encourage some more gold buying in China as a weaker yuan means a stronger dollar, and gold provides you exposure to the dollar, which makes gold attractive for the Chinese," Julius Baer analyst Carsten Menke said.
The Shanghai Gold Exchange said it would raise the margin requirement on its gold contract. The trading limit on the contract would also be raised.
In India, domestic prices soared to a record, dampening demand for the metal in the world's second-biggest gold consumer after China.
Meanwhile, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to 830.76 tonnes on Friday.
Elsewhere, silver rose 1.3% to $16.42 per ounce. Platinum climbed 1.2% to $852.60 per ounce, while palladium gained 1.2% to $1,423.13 per ounce.