Fears that a week-long cease-fire in the Middle East might unravel also supported the metal seen as a safe haven from riskier investments, dealers said.
Spot bullion hit a high of $626.40 an ounce before ending active New York trade at $625.60/626.40, versus $611.80/2.60 late on Friday, when it dropped to a three-week low of $607 on speculative selling.
"The buying seems to be mostly short covering in nature, triggered by the drop in the dollar and the rally in crude prices," said James Steel, precious metals analyst at HSBC Bank, who added gold was likely to stay choppy near term.
George Gero, vice president at RBC Capital Markets Global Futures, said buying also was touched off because of increased geopolitical tensions and a jump in copper prices amid a labor dispute at a giant Chilean mine.
"Traders said, 'I don't want to be short in gold,'" Gero said. "But it wasn't a major volume day and you have a limited audience because of holidays, so that helped exaggerate the market's move."
The dollar weakened across the board, hitting a two-month low against the euro as investors shunned the currency amid mounting evidence that the U.S. economy was slowing.
Gold generally rises with a drop in the dollar as the metal become cheaper for holders of other currencies.
Oil rose above $72 a barrel as Iran's supreme leader said the Islamic Republic would press on with its nuclear work, implying it would not heed a U.N. demand to stop enriching uranium. The row has raised concern of disruption to oil flows from the world's fourth-largest exporter.
Higher oil prices support gold because the precious metal is often used as a hedge against inflation.
German Chancellor Angela Merkel described the situation in Lebanon as "very fragile" as a truce between Israel and Lebanese Hizbollah guerrillas entered its second week. [nL20365032]
OUTLOOK
John Reade, precious metals analyst at UBS Investment Bank, added in a report: "We remain positively disposed to gold in the short and medium term. We believe this sell-off is overdone and has been exacerbated by low volumes.
"The dollar looks weak, oil has probably weakened too much
(and) physical demand for gold picked up strongly on Friday with good interest from the Indian trade."
Dealers said global tensions and firm oil would offer support for gold, but the metal lacked strength to break free from the current $600 to $650 range.
Other precious metals tracked gold's gains.
Platinum rose to $1,230/1,235 from $1,207/1,213 previously, while palladium was at $342/348, up from $329/334.
Silver increased to $12.29/12.39 an ounce from $12.01/12.11 late Friday.
