Gold rose to a two-week high overnight as political turmoil in the United States reduced expectations of aggressive interest rate rises this year, pushed down US bond yields and drove the greenback to its lowest in six months.

Lower yields reduce the opportunity cost of holding non-yielding gold, while a weaker dollar makes bullion cheaper for non-US investors. Higher interest rates would push yields up and likely boost the dollar.

Spot gold rose for a fifth day and was up 1.8 per cent at $US1258.28 an ounce by midafternoon in New York, after hitting $US1.260.20, the highest since May 1. It was on track for its biggest one-day gain since June 2016.

US gold futures settled up 1.8 per cent at $US1258.70.

"Downward movement in yields and the dollar have given support to gold," ABN AMRO analyst Georgette Boele said. "And on top of this you get political uncertainty which is denting the dollar."

US President Donald Trump is under pressure to explain whether he tried to interfere with a federal investigation after reports that he asked then-FBI Director James Comey to end a probe into Trump's former national security adviser, Michael Flynn.

"Investors' worry is that the president may have obstructed justice, which is a potentially impeachable offence," said Fawad Razaqzada, technical analyst for Forex.com.

That follows a turbulent week after Trump fired Comey and discussed sensitive national security information with Russia's foreign minister, causing investors to question whether Trump can push through tax cuts and deregulation.

"This has driven monies into safe-haven buying which is supporting gold," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.

The dollar fell to its lowest since Trump was elected in November and is likely to drop further, Boele said.

Stocks fell and 10-year US Treasury yields were at the lowest since April 21.

An unexpected drop in US homebuilding activity, reported on Tuesday, meanwhile raised new doubts about how many times the Federal Reserve will raise interest rates this year. Futures traders are pricing in a 66 per cent chance of a June rate rise, down from around 90 per cent earlier this month, according to CME's FedWatch Tool.

Technically, gold breached resistance at its 200-day moving average and Fibonacci retracement, both around $US1245, triggering technical buying.

Silver was up 0.6 per cent at $US16.92 an ounce and platinum was 0.7 per cent higher at $US944 an ounce. Palladium was down 2.2 per cent at $US776.22.