Gold rose to its highest level in more than seven years after the US Federal Reserve said stocks and asset prices could suffer a significant hit from the coronavirus pandemic.
The Fed also said that the process of economic recovery could stretch through until the end of next year.
Palladium surged more than $100 in 20 minutes.
Commercial real estate could be among the hardest-hit industries should the health crisis deepen, the Fed said in its twice-yearly financial stability report on Friday.
Separately, Fed chairman Jerome Powell told CBS that a full recovery of the US economy could drag through 2021 and depends on the delivery of a vaccine.
Bullion has surged 16 per cent this year as the spread of the virus curbed economic growth, roiled markets and prompted vast amounts of stimulus to be unleashed by governments and central banks.
Further bolstering the case for the metal has been recent speculation that US interest rates could go negative, while holdings in gold-backed exchange-traded funds are at a record.
Spot gold climbed as much as 1.2 per cent to $1,763.70 (Dh6,748.07) per ounce, the highest since October 2012, and traded at $1,760 per ounce at 9.24am UAE time.
“Financial markets can best be described as factoring in the best-case scenario, with economic stimulus leading to a rapid recovery,” said Gavin Wendt, senior resource analyst at MineLife.
“The reality is likely to be quite different and there is the prospect that no vaccine will be developed. The recovery is probably set to be more problematic than the optimists think, with gold set to benefit from the enormous boost to money supply that is going to ensue.”
Monday’s gain in gold comes after data released on Friday underscored how hard virus-related shutdowns have hit the world’s largest economy.
US retail sales and factory output registered the steepest declines on record in April.
Mr Powell is due to appear along with Treasury Secretary Steven Mnuchin before the Senate Banking Committee on Tuesday.
Fed officials including Mr Powell have consistently batted the idea of negative interest rates away, and he did so again on Sunday, saying that it is probably not an appropriate or useful policy for the US.
In other precious metals, silver climbed as much as 4 per cent and platinum advanced 3 per cent.
Palladium jumped as much as 8.3 per cent, the most since March 25, before trading 3.9 per cent higher at $1,955.85.
The surge comes even after MMC Norilsk Nickel said last week that demand may drop 16 per cent this year, the most in about two decades. The metal, alongside platinum, has found some recent support from operational curbs in South Africa.
