Gold prices surged more than 2.5 per cent to over seven-year highs on Monday as the spread of coronavirus outside China and its potential impact on global economic growth spurred safe haven buying.
Spot gold was up 2.5 per cent to $1,683.94 per ounce at 0953 GMT after hitting $1,688.66, its highest level since January 2013. US gold futures were up 2.3 per cent to $1,686.40.
Gold in euros hit an all-time peak of 1,560.39 euros per ounce, while gold priced in sterling rose to a record high of 1,308.20 pounds an ounce.
"Beyond the near term disruptions to global supply chains, the coronavirus could have an effect on headline GDP," said FXTM market analyst Han Tan.
"On the onset of 2020 we were optimistic that global economic conditions were able to recover on signs of subsiding trade tensions, but the potential fallout from the coronavirus not only triggers risk aversion, but could also erode the growth potential for the full year."
European shares tumbled more than 3 per cent after a sharp rise in new infections in South Korea, Italy and Iran exacerbated worries of a wider spread of the virus.
The World Health Organization said it is worried about the growing number of cases without any clear link to China.
"There seems to be a mix of short covering and a fear of missing out driving the gains (in gold), with $1,660 well supported on any pullbacks," MKS PAMP said in a note.
"Expect demand to remain firm through $1,660-$1,650, while there's little top-side resistance on the way to $1,700."
The US dollar also gained on increasing interest in safe haven assets.
The benchmark US 10-year Treasury yield fell to its lowest level since July 2016.
Investors are also expecting global central banks to further ease monetary policy as the risks from the virus threaten global growth. Lower interest rates reduce the opportunity cost of holding gold and tend to weigh on US. yields.
Reflecting increased investor interest in bullion, speculators raised their bullish positions on COMEX gold and silver contracts in the week to February 18, data showed on Friday.
Mirroring gold's gains, silver rose 2 per cent to $18.82 an ounce, having hit its highest since September at $18.90.
Palladium eased 0.4 per cent to $2,691.75 per ounce, while platinum shed 0.1 per cent to $972.96.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
