Lower interest rates cut the opportunity cost of holding non-yielding commodities, while gold also tends to benefit from growth concerns as an alternative to cyclical assets like stocks.
Spot gold was 0.1pc higher at $1,325.72 per ounce as of 1018 GMT, after touching its highest since Feb. 27 at $1,328.98 in the previous session.
US gold futures were up 0.2pc at $1,330.50 an ounce.
"A surge in safe-haven demand has been observed over the past few days because no-one expected the United States to open a new trade war front with Mexico after China," said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers.
"Safe-haven buying was also seen because manufacturing data from China and the euro zone were seen as a cause of concern."
On Monday, Washington accused China of pursuing a "blame game" in recent public statements and a weekend white paper that it said misrepresented the trade negotiations between the two economies.
The prolonged trade war between the two countries has roiled financial markets, denting risk sentiment among investors.
Elsewhere data showed US manufacturing growth slowed in May to its weakest pace in more than 2-1/2 years, fuelling bets that the Fed may cut rates by the end of this year.
St. Louis Fed president James Bullard on Monday conceded that risks to economic growth posed by trade tensions may warrant a rate cut soon.
The news prompted US Treasury yields to slip to their lowest since September 2017.
"The correction of the greenback has given a lift to bullion while the decline of US yields is another favourable element for the precious metal," said ActivTrades analyst Carlo Alberto De Casa in a note.
Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 2.2pc on Monday, their biggest one-day percentage gain since July 2016.
At these high price levels, "there will be some profit-booking, but the tone (for gold) is positive until $1,300 on the downside is breached," Trivedi said.
Silver was down 0.3pc at $14.73 per ounce, having touched a more than two-week high of $14.83 on Monday.
Platinum edged 0.1pc lower to $820.13 per ounce after hitting a two-week high of $825.78, while palladium was nearly steady at $1,324.76 per ounce.