Gold gained more than 1 per cent as firming crude oil prices and fears that a week-long ceasefire in Lebanon might unravel ignited buying from bargain hunters and physical buyers.
Oil prices rose above $71 a barrel after Iran said it would not suspend uranium enrichment ahead of a deadline from the UN to halt nuclear work. Tehran insists its nuclear aims are purely civilian.
Higher oil prices support gold because the precious metal is often used as a hedge against inflation.
Spot gold hit a high of $619.20 an ounce, up from $611.80/612.60 late in New York on Friday, when it had dropped to its lowest in more than three weeks to $607 an ounce on speculative selling.
'We are not out of the woods yet as far as the Israeli-Lebanon conflict is concerned. There could have been some physical buying as well, I suspect,' said Darren Heathcote of
Investec Australia in Sydney.
The UN said the week-old truce between Israel and Hizbollah could easily collapse into 'an abyss of violence and bloodshed' if the UN resolution that stopped the fighting was violated further.
The UN condemned an Israeli raid on Hizbollah in eastern Lebanon as a breach of Security Council resolution 1701, which brought the 34-day war between the two sides to an end.
Some dealers in Hong Kong reported physical uptake from jewellers.
'Even though we seem to have good support around $600, the trend is still pretty weak. Unless there's a significant buying signal, the market will still be in choppy mode,' said a dealer in Hong Kong.
'I think we will be trading in $613 to $620 range today. That's it,' he said.
On Hong Kong's Chinese Gold and Silver Exchange, gold rose to HK$5,713 per tael (37.5 gram ingot) by midday from HK$5,689 at the opening.
Some dealers said international tensions and firm oil prices would offer support for gold, but the metal lacked strength to break free from the current $600 to $650 range, given a lack of leads from the currency markets.
'The whole economic picture around is a little bit mixed. Investors are a little bit concerned about which way we can go ahead at the moment,' said Heathcote of Investec.
'It's one of the reasons why, more than anything at the moment, the geopolitical environment is driving it,' he added.
The dollar was little changed after US consumer sentiment data showed that the economy is slowing, even as inflation expectations climbed.
The dollar edged down to 115.61 yen. The euro was higher at $1.2872.
Anticipation of higher inflation offered some support to the US currency, despite a belief the Federal Reserve is unlikely to consider that inflation risks are high enough to warrant a rate rise at its policy meeting next month.
Benchmark gold futures on the Tokyo Commodity Exchange, currently June 2007, rose 17 yen per gram to 2,321 yen ($20.04), having fallen by the daily 60-yen limit to 2,304 yen on Friday.
Other precious metals tracked gold's gains.
Platinum rose to $1,222/1,227 an ounce from $1,207/1,213 late in New York. Sister metal palladium also rose to $333/338 an ounce from $329/334.
Silver edged up to $12.11012.20 an ounce from $12.01/12.11 late in New York.Reuters