US gold futures rose 0.4 per cent to $1,796.30.
"Lower US yields and the fact that equity markets are slightly softer on the back of the weakness in Asia markets is helping gold," said Michael Hewson, chief market analyst at CMC Markets UK.
"Some governments are slightly over reacting to Covid-19 cases, raising concerns that there could be another economic slowdown," Hewson said, adding that it meant central bank policy tightening might not happen.
Benchmark 10-year Treasury yields dipped to a near two-week low, translating into reduced opportunity cost of holding non-interest bearing gold.
A surge in Covid-19 cases in Asia and elsewhere sapped risk sentiment in wider financial markets.
Concerns over China's regulations for its once-freewheeling internet sector and turmoil in Afghanistan also kept investors on the edge.
Gold is considered a safe store of value during times of political and financial uncertainty.
"Afghan events do not usually move gold, but the swift and apparently complete Taliban victory may indirectly support 'safe haven' assets such as bullion, even if only modestly," HSBC said in a note.
"The impact on gold may be greater than at first imagined."
Focus now shifts to the US retail sales data due at 1230 GMT as well as minutes of the Federal Reserve's July meeting on Wednesday, which will be scanned for clarity on the tapering timeline.
Elsewhere, silver rose 0.2 per cent to $23.86 per ounce, having hit a high since 9 August at $23.95.
Platinum gained 0.4 per cent to $1,026.74, while palladium eased 0.1 per cent to $2,603.64.