Gold touched its lowest in six weeks on Thursday after the dollar and US bond yields rose on proposed US tax reforms and strong economic data that supported the case for another US interest rate hike this year.
The dollar was at its strongest since mid-August, US stocks rose and 10-year Treasury yields hit a 2-1/2-month high as markets bet President Donald Trump's tax-cutting plan could accelerate economic growth.
Data meanwhile pointed to underlying strength in the US economy a day after U.S. Federal Reserve Chair Janet Yellen indicated the Fed would push ahead with rate rises.
A stronger dollar makes gold more expensive for holders of other currencies, while higher bond returns reduce the attractiveness of non-yielding bullion. Interest rate increases raise bond yields and tend to boost the dollar.
“These developments are not something gold can thrive on," said Saxo Bank analyst Ole Hansen. “It's natural we see weakness coming through.”
Spot gold was up 0.2 per cent at $1,283.63 an ounce at 1017 GMT after earlier hitting $1,277.93, the lowest since August 16. US gold futures for December delivery were 0.1 per cent lower at $1,286.20.
Speculative fund investors were sticking with gold and demand was underpinned by geopolitical worries over North Korea's nuclear programme and an independence vote in Kurdistan, Hansen said.
“The fund long position has not been much reduced in recent weeks even though gold has retraced half of its July-to-September rally ... That indicates gold is less exposed to a major selloff,” he said.
Technical fibonacci support for gold was at $1,281.30, said analysts at ScotiaMocatta. The 100-day moving average was at $1,271.
In other metals, platinum was up 0.3 per cent at $918.74 an ounce and palladium was 0.6 per cent higher at $932, a day after palladium hit price parity with platinum for the first time since 2001.
Both metals are primarily consumed by automakers for catalytic converters, but platinum is more heavily used in the diesel vehicles that have fallen out of favour.
“In the long run, we believe palladium and platinum could trade at similar levels,” said Samson Li, an analyst with Thomson Reuters GFMS.
“The strength of palladium this year is due to the strong performance of the Chinese auto sector. Sales have been better than expected ... Palladium is like a growth stock while platinum is like a value stock now,” Li said.
Silver was up 0.1 per cent at $16.76 an ounce after earlier dropping to $16.64, its lowest since August 16.