Gold prices jumped to their highest level in as many as six weeks on Monday as a decline in equities hiked the yellow metal's safe-haven appeal.

In early morning trade in Asia, spot gold jumped to $1,259.46 per ounce.  It was the metal's highest level since 11th of December last year.  However, it later slipped back to $1,255.14 per ounce, still up 0.1 per cent.

The increase in the gold prices after holdings in the world's biggest gold-backed exchange-traded fund SPDR Gold Trust increased by 7.49 tonnes to 797.05 tonnes on Friday.  It was the first increase in around a month.

Figures released by the Commodity Futures Trading Commission also revealed that hedge funds and money managers hiked their bullish bets in gold as well as silver futures amid a fall in stocks.

Some experts are of the view that there is a greater potential for modest gains in prices of gold this year than for a downside risk.

Danny Laidler, head of Australia and New Zealand business at ETF Securities, said, "I think the worst of the outflows is behind us.  We think there is a greater potential for modest gains (in gold prices) this year than for a downside risk."

Laidler added that a lot of the company's clients were still holding onto the precious yellow metal as a risk-event hedge.

The recent rally in gold prices dragged China's demand for gold slightly down.  On the Shanghai Gold Exchange, premiums for 99.99 per cent purity gold slipped to around $13 on Monday from $17 on last Friday.  China last year surpassed India to become the world's biggest consumer of gold.