Gold settled nearly 1 percent higher at $1,328 on Thursday, after briefly extending the previous day's 2 percent selloff, as the dollar's fall against a currency basket supported the precious metal.
The lack of clear direction in the gold price reflected indecision among traders awaiting fresh indications on Federal Reserve policy, with the central bank due to meet next week.
The metal hit a one-month high earlier this week after assurances from the Fed that any changes to its gold-friendly quantitative easing (QE) policy would depend on economic data.
Figures on Wednesday showing new U.S. home sales jumped to a five-year high in June helped knock gold prices sharply lower, however, and trading has been choppy as a failure to hold onto gains spooked investors, prompting further liquidation.
Spot gold fell as low as $1,308.74 an ounce in early trade but had recovered to $1,328 an ounce, up 0.6 percent, while U.S. gold futures for August delivery settled $9.30 higher at $1,328.80 an ounce, up 0.7 percent on the day.
"Gold is still searching for some decisive news either way from which it can take a trend," Mitsubishi analyst Jonathan Butler said. "In the absence of that, we are going to see some pretty choppy, volatile trading."