Gold logged it biggest one day gain in about three weeks on Thursday after the European Central Bank cut interest rates to record lows and its chief Mario Draghi unveiled a package of new stimulus measures.
Dealers who had bet against gold in the run-up to the announcement rushed to cover positions as the metal held above $1,240 an ounce, traders said.
for August delivery ended $9.00 higher at $1,253.30 an ounce, its best day since May 14.
Spot gold, meanwhile, was up 0.8 percent at $1,253 an ounce, off a high of $1,256.50. It earlier dipped as low as $1,240.90, close to this week's four-month low of $1,240.61.
Chart: Precious Metals
The ECB lowered the deposit rate to -0.1 percent, meaning it will effectively charge banks for holding their money overnight. It cut its main refinancing rate to 0.15 percent, and the marginal lending rate - or emergency borrowing rate - to 0.40 percent.
Draghi later unveiled a package of measures to stimulate the euro zone economy, saying the ECB will offer banks a targeted long-term refinancing operation (LTRO) to persuade them to lend, was preparing to purchase asset-backed securities and will discontinue sterilizing previous bond purchases.
"The market was short into the announcement, and with quantitative easing arriving in the euro area, shorts are now being reined in," Saxo Bank's head of commodities research Ole Hansen said. "It has probably got another percent in it towards $1,268 before resistance is met."
Gold tends to benefit from low interest rates and looser monetary policy, which cuts the opportunity cost of holding non-yielding bullion.
Hansen said gold's move in the opposite direction to the euro, with which it usually trades in line, was unsurprising, given the reasons for the euro's fall. "Interest rates will stay lower for longer than previously expected," he said.
Markets were now eyeing Friday's U.S. nonfarm payrolls to gauge the strength of the economy.