Gold traded near a more than six-month peak, but was still headed for its first annual decline since 2015, having lost this year to dollar strength due to trade tensions and rising interest rates by the US Federal Reserve.
Spot gold was up 0.1 per cent at $US1,281.25 an ounce on Monday.
It hit its highest since June 15 at $US1,284.09 earlier in the session.
US gold futures settled down 0.1 per cent at $US1,281.30 per ounce.
‘We are starting to see signs of crack in the economic future of the global economy. So people are getting very concerned and are starting to put money back into gold,’ said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.
‘Gold could reach the $US1,400 mark this coming year,’ he added.
Spot prices have gained about 5 per cent in december, the most since January 2017, but were still down 1.6 per cent in the year to date.
‘Gold started well in 2018, but a recovery in the US dollar weakened prices and uncertainty on the US-China trade front weakened the yuan, further pulling gold down,’ said ABN AMRO analyst Georgette Boele.
Some stabilisation in the yuan and weakness in the dollar has helped the recent recovery in gold, she said, which has put the metal on track for its best December in a decade.
The dollar slipped 0.3 per cent, but was set to close the year up nearly 5 per cent against its rivals.
Its strength helped send gold to a 20-month low in August.
But the metal has since recovered about 10 per cent.
Political and economic considerations will support prices in the first quarter of 2019, said Benjamin Lu Jiaxuan, commodities analyst at Singapore-based brokerage firm Phillip Futures.
The outlook for the dollar is also more subdued going into 2019, with growing expectations that a three-year rate-hiking cycle in the United States has come to a close.
Markets currently expect no rate hikes next year.
In other trading, auto catalyst metal palladium rose 0.9 per cent to $US1,264.99 an ounce, taking its gain for the year to 19.2 per cent and making it the best-performing of the major precious metals for the third year in a row.
This year it also surpassed gold for the first time since 2002 on strong demand from makers of catalytic converters.
‘The key driver in this strength has been growing demand from the auto sector with stricter pollution standards in China increasing the amount of palladium used in auto catalysts,’ ING said in its commodities outlook for next year.
Silver rose 0.7 per cent to $US15.44 an ounce in the session but was down 8.7 per cent for 2018.
Platinum edged up 0.1 per cent to $US790.49, making little impact on a decline of about 14 per cent for the year.