Spot gold rose 1.4% to $1,840.97 per ounce by 2:20 p.m. ET (1820 GMT), while U.S. gold futures settled up 1.4% at $1,841.2.
Gold prices dropped to a near four-month low earlier on Monday and are up about 3% since the dollar backtracked from 20-year highs.
"Dollar is falling and yields are significantly lower and this is good news for gold," said Edward Moya, senior analyst with OANDA.
Making bullion cheaper for overseas buyers, the dollar slid 1%, while U.S. yields dropped to a three-week low. [USD/] [US/]
Although the number of Americans on jobless rolls are at its lowest since 1969 in early May, weekly jobless claims unexpectedly rose last week.
"Gold is attracting safe-haven flows as the focus has shifted to the weakness in the U.S. with jobless claims rising and all the negative talk about inflation. There is good amount of pessimism with regards to global stocks," Moya added.
Further aiding the safe-haven metal's appeal, global equity markets skidded further as fresh signs of slowing growth led investors to sell stocks and move into safe-haven assets. [MKTS/GLOB]
Gold is considered an inflation hedge. However, the metal has had to battle with the dollar as a safe-haven of late given the U.S. Federal Reserve's aggressive policy stance to fight surging prices.
Non-yielding bullion tends to fall out of favour when interest rates rise.
The recent retreat in gold prices has helped its appeal among investors as they continue to seek safety from riskier assets and hedge against inflation, Fawad Razaqzada, market analyst at City Index, wrote in a note.
Spot silver was up 2.5% to $21.92 per ounce, platinum jumped 3.1% to $964.23 and palladium rose 0.1% to $2,018.06.
(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri and Amy Caren Daniel)
By Ashitha Shivaprasad