Gold snapped a two-day decline on Thursday, as the dollar edged lower and signs of physical demand emerged from Chinese buyers.
Gains were kept in check by strong U.S. economic data suggesting an end to the Federal Reserve's stimulus.
Activity was relatively thin, as U.S. financial markets will be shut on Thursday for the Thanksgiving holiday.
(Read more: Has the dreaded taper already started?)
Spot gold rose 0.4 percent to $1,242 an ounce by 1040 GMT. It fell to a 4-1/2 month low of $1,227.34 on Monday.
U.S. gold futures rose 0.3 percent to $1,241.50 an ounce.
"The story for gold remains pretty much the same... and the drivers for now remain the dollar and the U.S. data," VTBCapital Andrey Kryuchenkov said.
On the downside, support stands at $1,220, and then the longer-term level would be $1,200, Kryuchenkov added.
(Read more: Bargain hunters get ready to buy gold)
The dollar index fell 0.2 percent against a basket of currencies, retreating after gaining from relatively positive U.S. data in the previous session.
U.S. jobless claims unexpectedly fell last week and the November Thomson Reuters/University of Michigan consumer confidence improved from a preliminary reading. The Chicago PMI held up better than expected last month after surging in October.
However, a soft October durable goods report was the only dent to an otherwise upbeat set of figures.
Investors fear strong economic data could prompt the Fed to cut back on its $85 billion in monthly bond purchases, which have bolstered gold as a hedge against inflation over the past few years.