Gold extended gains to a second session on Tuesday as the US government shutdown dragged on and a deadline to raise the national debt ceiling loomed, bolstering the metal's safe-haven appeal.
Prices also found support from China, which reopened after a week-long National Day holiday. China is the world's second-biggest gold consumer after India.
The budget impasse that has shut down parts of the US government for a week looked set to continue as Congress remained deadlocked over funding President Barack Obama's healthcare plan.
The United States faces an Oct. 17 deadline to raise its $16.7 trillion debt limit, with investors fearing the budget disagreement would affect talks to lift the debt ceiling and push it towards an unprecedented default.
"There won't be any default on the US debt as I don't think Congress will want to take that risk," said Alexis Garatti, an economist at Haitong International Research in Hong Kong. "We will probably have a last minute agreement."
"In the very short term, we expect gold prices to increase because of the surge in risk aversion. But we expect an agreement before the 17th, so gold will retreat to levels seen in the beginning of the month."
Garatti also said the uncertainty around the debt ceiling will prompt the Federal Reserve to postpone any tapering of the stimulus measures to December or early 2014, providing some medium-term support for gold.
Spot gold rose 0.3% to $1,325.19 an ounce by 0631 GMT. Platinum climbed for a third straight session on fears mine strikes in South Africa could hurt supply.
Gold has lost a fifth of its value this year on fears the Fed will stem the flow of easy money that has increased the metal's appeal as a hedge against inflation.
Dealers in Hong Kong said they were seeing good buying interest from China. However, the demand was not strong enough to boost gold prices sharply.
Gold importers in India started processing orders to re-stock ahead of the peak wedding and festival season and after the customs department cleared remaining consignments at a major airport.
Gold imports had virtually come to a stop in India for about two months after a new rule that required a fifth of all imports to be re-exported. Banks are just beginning to place orders after uncertainty over the rules were cleared up.
Precious metals prices 0631 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1325.19 3.90 +0.30 -20.86
Spot Silver 22.34 0.03 +0.13 -26.22
Spot Platinum 1400.99 8.69 +0.62 -8.73
Spot Palladium 703.97 2.97 +0.42 1.73
COMEX GOLD DEC3 1325.70 0.60 +0.05 -20.89 19577
COMEX SILVER DEC3 22.39 0.00 +0.02 -26.12 7092
COMEX gold and silver contracts show the most active months