Gold prices rose in Asian trade on Monday as the dollar fell on expectations that the US Federal Reserve will not raise rates this year and as Asian stocks tumbled after lacklustre China data pointed to a slowdown in the world's second-largest economy.
Gold tends to gain on expectations of lower interest rates, as they reduce the opportunity cost of holding a non-yielding bullion and trim the demand for US dollar, making the yellow metal less expensive for holders in other currencies.
Spot gold was up 0.3 percent at $1,291.68 per ounce, as of 0735 GMT, while US gold futures were up 0.2 percent at $1,292 per ounce.
The weakness in equities and US dollar appear to be providing support for gold, said Michael McCarthy, chief strategist, CMC Markets and Stockbroking. "The market feels there is a shift in the Fed's stance and it is more accommodative and we are seeing the dollar weakening for several sessions."
The US central bank had the ability to be patient on monetary policy given stable price measures, US Federal Reserve Chairman Jerome Powell said last week, and he downplayed predictions from policymakers suggesting interest rates would be raised twice more this year.
"The (gold) market is cautious ahead of data flows that might revise the recent very dovish outlook," said Nicholas Frappell, global general manager at ABC Bullion, adding that the metal was facing a resistance around $1,300 level.
Spot gold has gained over 11 percent since hitting a 1-1/2-year low in mid-August at $1,159.96 due to volatile stock markets and a weaker dollar.
"The geopolitical risks have also started to induce some safe-haven buying. Investors are becoming increasingly worried about the Brexit negotiations. At the same time, there appears no end in sight for the US government shutdown," ANZ said in a note. Spot gold remains neutral in a range of $1,279-$1,299 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.