On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded up 3.42% at USD1,603.35 a troy ounce.
Gold hit a low of USD1,551.35 a troy ounce and a high of USD1,607.45 a troy ounce early during the session.
Gold futures were likely to test support at USD1,548.45 a troy ounce, the low from June 28, and resistance at USD1,622.95, the high from June 20.
Positive news out of Europe coupled with tepid U.S. data served as the perfect cocktail for gold to soar and the dollar to drop.
European Union leaders gave the green light for rescue funds to stabilize bond markets without forcing countries in compliance with deficit regulations to shoulder added austerity measures.
E.U. officials also allowed the continent's bailout fund, the European Stability Mechanism, to directly recapitalize banks, which won't add to overall national debt burdens since the money will go straight to banks and bypass sovereign books.
E.U. policymakers also agreed to launch a supervisory body for eurozone banks by the end of this year.
The news surprised investors, who were worried the summit would produce statements of good intentions but little in the way of policy.
Relief sent bond yields soaring, especially in higher-risk countries like Spain that will benefit the most from the measures, and the dollar falling.
The yield on the Spanish 10-year note plunged 39 basis points to 6.56%, while Italy's 10 year yield fell 42 basis points to 5.78%.
Gold also rose on lackluster U.S. economic indicators.
In the U.S., the Bureau of Economic Analysis reported earlier that personal spending remained unchanged at a seasonally adjusted rate of 0.0%, slightly off from 0.1% in the preceding month whose figure was revised down from 0.3%.
Meanwhile, the Thomson Reuters/University of Michigan final index of consumer sentiment fell to 73.2 in June from a final reading of 79.3 in May.
Analysts had expected the rate to remain unchanged at 74.1 last month.
Elsewhere on the Comex, silver for September delivery was up 4.91% and trading at USD27.583 a troy ounce, while copper for September delivery was up 5.37% and trading at USD3.510 a pound.