Gold inched higher on Friday as investors judged that a sell-off sparked by a rise in U.S. interest rates this week had run its course and the dollar weakened, making bullion cheaper for holders of other currencies.
Spot gold rose 0.08 percent to $1,254.50. Earlier in the session, it hit $1,251.05, its weakest since May 24. The metal has fallen about 1 percent so far this week.
U.S. gold futures for August delivery settled up $1.90 at $1,256.50.
The dollar index firmed after data showed the number of Americans filing for unemployment benefits fell more than expected last week.
Gold was on track for a second weekly loss and has fallen more than 3 percent from a high of $1,295.97 on June 6 as investors braced for the U.S. Federal Reserve to raise interest rates and signal its policy outlook on Wednesday.
Bullion is sensitive to higher interest rates because they push bond yields higher, increasing the opportunity cost of holding non-yielding gold, and tend to boost the dollar.
"Gold has been spooked by the hawkish tone from the Fed which triggered some long liquidation both in futures and exchange-traded funds," said Saxo Bank analyst Ole Hansen.