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Gold gained 1.7% to a one-month high on Monday on technical buying after the US dollar slipped, but the precious metal is still down more than a fifth this year.
Bullion's appeal as a hedge against inflation has been dented by expectations the US Federal Reserve will eventually pare back its bond-purchase programme. The Fed's three quantitative easing schemes have boosted gold and other commodities.
Gold climbed to as much as $1,322.50 an ounce, its highest since June 20, and stood at $1,317.74 by 0617 GMT. The metal is more than $600 below a lifetime high of $1,920.30 struck in 2011.
"It broke through a key technical level, which is $1,300. That level has been tested a few times in the last one-and-half weeks. It's a lot of technical buying and high-frequency trading," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.
"I don't think fundamentals have changed. I think gold prices are still more prone to the downside. Ben Bernanke's speech last week seems to show the market should be prepared for a reduction in bond buying," said Liu, referring to the Fed chairman.
Although cash gold still gained support from bullion futures on the Tokyo Commodity Exchange, outflows from the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were likely to cap gains.
The most active June 2014 gold contract on TOCOM rose as high as 4,258 yen a gram, its highest since June 17, because of an initial drop in the yen and the Nikkei's gains.
U.S. gold rose 1.91% to $1,317.60 an ounce.
The euro edged up, but the yen briefly slipped after Prime Minister Shinzo Abe was given a solid platform to continue his aggressive push to reflate the world's third-biggest economy. The dollar index was down 0.1%.
Physical buyers were mostly absent on Monday, but dealers in Hong Kong said supply of gold bars and coins had tightened after a drop in prices to a near three-year low of around $1,180 in late June ignited buying.
"We heard some gold refiners in Switzerland will close in August for the summer holidays. They have stopped taking orders. There's technical buying. Maybe we are looking for the price to go up to $1,325," said a dealer in Hong Kong.
"Gold prices in Shanghai are still at premiums, so it also suggests there's a little buying there."
Gold prices in Shanghai were around $22 higher than cash gold.
In other precious metals, silver tracked gold higher, platinum rose to its highest since June 19 and palladium jumped to its strongest in nearly six weeks.
Hedge funds and money managers raised their bullish bets in gold and silver futures and options in the week to July 16, while they trimmed net shorts in copper, a report by the Commodity Futures Trading Commission showed on Friday.
