Spot gold jumped 1.1% to $1,926.76 per ounce by 12:15 p.m. ET (1615 GMT), after touching its highest since Oct. 12. U.S. gold futures rose 0.8% to $1,931.10.
"Nancy Pelosi had a Tuesday deadline. Well, now it's been pushed down to Friday. Knowing that, people think a deal might get done in the near future, so they're starting to accumulate gold," said Michael Matousek, head trader at U.S. Global Investors.
White House Chief of Staff Mark Meadows said the biggest sticking point remains funding for state and local governments, but added that progress has been made toward a coronavirus relief deal.
The increased bets for an eventual breakthrough pushed the dollar to its lowest in nearly two months, making gold less expensive for holders of other currencies.
Gold, considered a hedge against inflation, currency debasement and uncertainty, has gained more than 26% this year, driven mainly by unprecedented levels of global stimulus to cushion economies from the coronavirus-induced slump.
"What's going to create that demand to propel gold higher? It's going to be the continued stimulus, continued negative interest rates, people worried about the COVID infection spiking because gold is thought of as a safe haven," added U.S. Global Investors' Matousek.
Looking ahead, a Reuters poll predicted that while gold may average less than $2,000 next year as a record rally slows, prices could still touch new highs.
Elsewhere, silver rose 1.9% to $25.10 per ounce, platinum gained 1.8% to $886.45 and palladium inched up by 0.2% to $2,403.48.
Platinum and palladium could gain on a tentative recovery in the auto sector, the survey showed.
(Reporting by Asha Sistla in Bengaluru; editing by Jonathan Oatis and Marguerita Choy)
By Asha Sistla