Gold rose to a two-week high on Thursday buoyed by a fall in the dollar after weaker-than-expected U.S. economic data boosted prospects the Federal Reserve will keep its monetary stimulus in place.
Speculation the U.S. central bank could start reining in its $85 billion in monthly asset purchases as early as the summer had sparked a sell-off in gold and a rally in the dollar last week.
Prices rose over 1.5 percent to $1,417.81 an ounce after data on Thursday showed the U.S. economy grew at a slower pace than initially expected in the first quarter. Separately, weekly initial jobless claims unexpectedly rose last week and pending home sales increased less than expected.
"The market's gaining back everything it lost on the (Fed) comments last week and nothing's changed," said Sean McGillivray, head of asset allocation at Great Pacific Wealth Management.
"The market has realized that any change in policy will be a long ways off and most likely a much smaller change than a complete shut-off of the liquidity pump."
Prolonged accommodative monetary policies favor gold as low interest rates encourage investors to put money into the non-interest-bearing assets.
Traders said volumes could see wide swings due to the June-August contract roll over on Friday.
U.S. stocks were also buoyed by the unexpectedly weak data that quelled concerns about tapering Fed purchases. The dollar fell to a three-week low against the euro.
Euro zone data also showed confidence in the bloc's economy improved more than anticipated in May.
In bond markets, U.S. 10-year Treasury yields retreated from 13-month highs reached earlier in the week.
As gold has no interest rate, a fall in returns from U.S. bonds and other markets, at least for now, is seen as a positive sign.
For now, strong premiums for gold bars in Asia have indicated jewelers and retail investors are happy to buy bullion on dips. In Singapore, supply constraints have sent premiums to all time highs at $7 to spot London prices.
"Asian buyers were once again active, while we have noted before that physical demand was supportive on price pullbacks," VTB Capital said in a note.
Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.9 tonnes to 1,013.15 tonnes on Wednesday, the first increase since May 9.
Silver extended gains to a one-week high of $23.09 an ounce and was recently up 0.98 percent at $22.70 per ounce. Platinum rose 2 percent to 1,481.50 and palladium gained 1.14 percent to $755.22 an ounce.