Spot gold rose 0.4% to $1,853.70 per ounce by 2:20 p.m. ET (1820 GMT). Prices rose more than 1% and hit their highest since May 9 at $1,865.29 earlier in the session.
U.S. gold futures settled up 0.3% at $1,847.8.
"There is a strong corrective bounce in gold as the U.S. dollar is seeing a sharp fall," said Kitco senior analyst Jim Wycoff.
The dollar slumped to its lowest in a month, making gold cheaper for other currency holders. [USD/] [US/]
"Traders and investors' risk appetite remains far less than robust, which is prompting some safe haven demand for gold. Investors are beginning to realise that inflation is going to be problematic for longer than just a transitory period."
Dimming gold's appeal, U.S. Treasury yields gained on the day.
Although gold is considered a hedge against inflation, it is highly sensitive to rising U.S. interest rates, which raise the opportunity cost of holding non-yielding bullion.
"While today's increase is welcomed by holders of gold, how much further the precious metal can climb is likely to be capped by the reality that central banks in both America and Europe are set on a course of interest rate hikes over the coming months," Rupert Rowling, market analyst at Kinesis Money, said in a note.
Atlanta Federal Reserve President Raphael Bostic said on Monday that the quick response in financial markets to tighten monetary policy offers hope that other parts of the economy may adjust more quickly as well.
Spot silver gained 0.2% to $21.79 per ounce, platinum was up 0.1% to $956.76 and palladium rose 1.3% to $1,988.44.
Russia's Nornickel, the world's largest producer of palladium, expects global palladium market deficit to be at 100,000 troy ounces in 2022, downgrading estimates from its February forecast.
(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Shailesh Kuber and Amy Caren Daniel)
By Ashitha Shivaprasad
