Gold traded in a narrow $3 range on Monday as strong U.S. economic data encouraged investment in riskier assets while limited risk hedging supported the metal.
Spot gold ticked up 0.1% to $1,558.46 per ounce by 0359 GMT, after a near 0.4% drop last week. U.S. gold futures were down 0.1% to $1,558.40.
"Investors are clearly focused on the longer term dynamics, which should play in gold's favour with low interest environment, central banks' loosening policy to help support growth and subsequent weakness in the dollar," ANZ analyst Daniel Hynes said.
Gold was also supported as the U.S. Federal Reserve is expected to keep interest rates on hold at its first policy meeting of the year later this month, he added.
The Fed cut interest rates three times last year before deciding in December to stand pat and signal borrowing costs will not change anytime soon.
Lower interest rates encourage the buying of non-interest-paying bullion.
Trading volumes were low with U.S. markets closed for a holiday and ahead of the Chinese Lunar New Year starting later this week.
"We have the seasonality factor that would keep gold trading higher in January ... there's just not a lot of reasons not to own gold," said Stephen Innes, a market strategist at AxiTrader.
Asian stocks surged close to a 20-month high, supported by an extended rally in global stocks on Wall Street and solid U.S. economic data.
U.S. homebuilding surged to a 13-year high last month as activity increased across the board, while production at factories increased for a second straight month, data showed on Friday.
Spot gold may test a resistance at $1,564 per ounce, according to Reuters technical analyst Wang Tao.
Speculators cut their bullish positions in COMEX gold contracts in the week to Jan. 14, data showed.
Holdings of the world's largest gold-backed exchange-traded fund SPDR Gold Trust rose 2.20% to 898.82 tonnes on Friday, their highest since Nov. 11.
Palladium advanced 0.8% to $2,500.00 an ounce, after having hit a record high of $2,537.06 on Friday.
A squeeze in ready availability of the automotive metal has driven up already record-high prices by 25% in just two weeks, accelerating a four-year rally and stoking expectations for further gains, analysts said.
Silver edged higher by 0.1% to $18.02 per ounce, while platinum rose 0.5% to $1,023.22.