Gold raced towards the key $1,900 level on Monday, emboldened by bets that the Federal Reserve may have to tone down its rate hikes as investors sought cover from uncertainty triggered by the collapse of U.S. lender Silicon Valley Bank.

Spot gold was up 1.6% at $1,897.31 per ounce, as of 1237 GMT, the highest price since early February. U.S. gold futures gained 1.7% to $1,898.10.

On Friday, gold climbed 2% after California regulators closed tech startup-focused Silicon Valley Bank. Regulators also shuttered New York-based Signature Bank on Sunday.

"Recent events show that gold remains a safe-haven asset as it is able to benefit from market uncertainty. Also, market participants pricing out rate hike expectations is lifting gold," UBS analyst Giovanni Staunovo said.

Lower interest rates decrease the opportunity cost of holding zero-yield gold.

After the SVB collapse, traders now expect the Fed to no longer raise its benchmark overnight interest rate by 50 basis points this month, in contrast to a 70% probability before the crisis. Rate cuts have also now been priced in by the end of 2023.

Gold's gain indicates some institutional money came into the market, but it's not certain that this trend will be seen in exchange-traded funds (ETFs), said Philip Newman of Metals Focus.

Gold found further tailwinds from the simultaneous retreat in the dollar index, which made bullion cheaper for overseas buyers.

Meanwhile, U.S. officials announced a series of measures to battle the financial fallout from SVB's collapse, but a wider stock market sell-off continued into European markets.

"The near-term path (for gold) remains difficult to predict. It will be dependent on the upcoming U.S. economic data, such as the CPI data (on Tuesday)," Staunovo added.

Silver added 4.5% to $21.43 per ounce, platinum was 2.9% higher at $987.20 and palladium climbed 2.4% to $1,411.33.

(Reporting by Ashitha Shivaprasad and Arundhati Sarkar in Bengaluru; editing by Philippa Fletcher, Varun H K and Paul Simao)