Saudi Arabia cut ties with Iran on Sunday, responding to the storming of its embassy in Tehran in an escalating row between the rival Middle East powers over Riyadh's execution of a Shi'ite Muslim cleric.
Iran's top leader, Ayatollah Ali Khamenei, predicted "divine vengeance" for the execution of Sheikh Nimr al-Nimr, an outspoken opponent of the ruling Al Saudi family.
Spot gold was up 0.4 percent to $1,064.40 an ounce by 0323 GMT, while U.S. gold futures rose 0.3 percent. Silver jumped nearly 1 percent to $13.89, tracking the yellow metal.
"Gold is being bid up due to the risk-off sentiment in the market," said a precious metals trader in Singapore.
Asian shares and currencies fell on Monday due to tensions in the Middle East and soft Chinese data.
The dollar fell to a 10-week low against the yen, also seen as a safe haven. A weaker dollar makes gold cheaper for holders of other currencies.