"There is momentum as people start to look again how far they can push gold higher," said Georgette Boele at ABN AMRO.
The dollar had hit a ceiling and would fall further in the near term, she said.
President Donald Trump's failure so far to push through promised economic stimulus measures may have influenced the Fed, Tom Kendall at ICBC Standard Bank said.
"If infrastructure spending and tax cuts are being pushed further and further out, it gives the Fed more reason to be cautious. That is a bit of a vacuum that gold can rally into," he said.
Failure to deliver swift tax cuts and regulatory reform could puncture a rally in U.S. stocks, said Edward Meir at INTL FCStone.
"Any retracement in stocks could help gold build on its recent move," he said in a note.
Investors were also looking ahead to the Group of 20 finance leaders' meeting in Germany this weekend, where any attempt by the Trump administration to pursue protectionist policies could fuel demand for gold as a safe haven.
However, strong U.S. economic growth will inevitably push the Fed to ratchet up rates, putting pressure on gold, said ICBC's Kendall. He sees gold averaging $1,140 in the second quarter.
Rate rises lead to higher bond yields, which increase the opportunity cost of holding non-yielding bullion and tend to boost the dollar, in which gold is priced.