Spot gold inched up 0.5% to $1,272.40 an ounce by 1111 GMT, extending a 1.9% rally last week, its sharpest weekly gain since January 3. February US gold futures rose $9.40 to $1,272.10 an ounce.
In sync with the global market, gold prices surged by Rs 470 per 10 gram to Rs 30,670 in Delhi as jewellers were back in the market to replenish inventories in view of the ongoing marriage demand.
Analysts said funds are now awaiting the first testimony of new Federal Reserve chairperson Janet Yellen to the House on Tuesday and the Senate on Thursday, with the hope that given the weakness in the economy, the central bank may keep the monetary policy loose for some more time. US non-farm job growth hit 113,000 last month against a consensus of 185,000.
China also returned to the physical gold markets strongly after a week-long break, as banks and retailers moved to replenish
stock following solid sales during the Lunar New Year holiday, said Prithviraj Kothari, managing director of Riddisiddhi Bullions. This also aided the gold rally.
Earlier this month, the Fed decided to reduce its bond purchases by another $10 billion as it continued with a plan to roll back its stimulus programme, adding that it aimed to finish the tapering by the end of this year depending on the health of the labour market.
Prices of gold, considered a safe-haven asset and a hedge against inflation--lost 28% last year as the Fed decided to start scaling back its bond-buying stimulus measures after weeks of keeping investors on edge about the tapering.
An end to the Fed's quantitative easing programme hurt gold, as the precious metal's rally in recent years was aided by a low interest rate environment, which prompted investors to shift to haven assets like gold to beat inflationary pressure.
Among other precious metals, silver gained 0.9% to $20.15 an ounce, having rallied by 4.6% last week, its loftiest gain since mid-August. Platinum gained 0.4% at $1,384.40 an ounce and palladium rose 1.2% to $716.50 an ounce.