US gold futures settled up 1.7% to $1,555.90. Renewing fears of a sharp economic slowdown and weighing on risk sentiment, US manufacturing activity contracted for the first time in three years in August. Weak manufacturing data "will further embolden the view that the US Federal Reserve is going to need to be aggressive with rate cuts," said Ryan McKay, a commodity strategist at TD Securities.
"Equities are on the back foot, that's what's keeping gold higher. There's a lot of uncertainty on the Brexit front, politics in Italy, protests in Hong Kong as well - a lot of stuff that's positive for gold."
Gold also shook off mild pressure from the dollar earlier in the session, with the US unit holding gains versus other major currencies.
"Dollar is also being seen as a safe-haven asset ... Even Treasuries are up, dollar is up, silver is up, gold is up - it's all the safe-haven assets up together," said Phillip Streible, senior commodities strategist at RJO Futures.
"Gold has aggressively priced in Fed rate cuts. With little opportunity cost in holding gold and growing economic uncertainty tied to escalating US-China trade tensions, investor appetite for the yellow metal has grown," BNP Paribas analysts wrote in a note, forecasting average gold prices to climb above $1,600 driven by the Fed's monetary easing cycle.
Federal fund futures implied traders saw a 91% chance of a 25 basis-point rate cut by the US Federal Reserve this month. Meanwhile, platinum rose 2.3% to $951.35 per ounce after reaching $956.99, its highest since March 2018. Palladium was up 0.2% at $1,533.70 per ounce.