The yen also gained on concerns of a wider outbreak which has prompted the World Health Organisation to convene an emergency meeting to assess the situation
Gold prices rose to a two-week high on Tuesday as a new strain of pneumonia in China stoked fears of a wider epidemic that could hamper economic growth, sparking a sudden bout of risk aversion and sell-off in Asian stocks.
Spot gold prices touched their highest since January 8 at $1,568.35 and were up 0.3% at $1,566.06 per ounce by 0326 GMT US gold futures were 0.4% higher at $1,566.30.
Asian shares slipped as the new coronavirus has spread to more Chinese cities and concerns mounted it could spread further with many travelling for the Lunar New Year holidays.
Gold prices were driven by "the rapid spread of the virus from Wuhan, China, which has caused a panic", said Margaret Yang Yan, a market analyst at CMC Markets.
"Chinese New Year holidays are going to worsen the situation as people are bound to travel in China. The fear of outbreak is going to drive up demand for gold for a couple more days," she added.
China will start celebrating the Lunar New Year this weekend.
The yen also gained on concerns of a wider outbreak, which has prompted the World Health Organisation to convene an emergency meeting to assess the situation.
Boosting safe-haven bids further, three Katyusha rockets fell inside Baghdad's Green Zone which houses government buildings and foreign missions, and the International Monetary Fund on Monday trimmed its global growth forecasts for 2020 and 2021.
Bullion is considered a safe asset during times of financial and geopolitical uncertainty.
Meanwhile, the Bank of Japan kept monetary policy steady and nudged up its economic growth forecasts, as the government's spending package and receding pessimism over the global outlook take some pressure off the central bank to top up stimulus.
Markets also kept a tab on developments in the World Economic Forum in Davos and awaited the European Central Bank's first policy meeting of the year this week.
Palladium advanced 0.6% to $2,515.05 an ounce. The auto-catalyst metal hit a record high of $2,582.19 in the previous session.
Silver rose 0.3% to $18.12 per ounce, while platinum moved higher by 0.3% to $1,018.91.