Gold settled higher on Wednesday as positive technical factors outweighed a rise in investor appetite for other, riskier assets following comments by the new U.S. Federal Reserve chief about the economic outlook.
"At the moment, it seems that there is some technical momentum, and you can see prices tasting levels around $1,300, where the 200-day moving average is," Credit Suisse analyst Karim Cherif said.
"But if you look at what investors have been doing, it is to use any rebound in the gold market to reduce exposure," he added.
"We expect prices to moderate again as there is no real reason for investors to hold gold ... the dollar will strengthen, yields will move moderately higher, and assets like equities should continue to do well after what the healthy correction seen earlier in the year."
Spot gold, initially low, rebounded to a fresh three-month high of $1,295.20 an ounce. It was last down 0.1 percent at $1,290 an ounce. It closed up 1.3 percent in the previous session.
U.S. gold futures for April delivery settled $5.20 higher at $1,295.00 an ounce.
Gold usually holds an inverse relation with the direction of shares as risk appetite detracts interest from the metal, regarded as a safe haven. But at times over the past few sessions the metal has risen alongside equities.
From a technical viewpoint, a confirmed close above the $1,290/$1,300 area could signal further gains, while support is pegged at $1,278, analysts said.
In other markets, the dollar index pulled away from two-week lows, up 0.2 percent, while global shares rallied.
Gold has gained around 7 percent since the beginning of the year, propped up by concerns about emerging markets and about economic growth in China. It fell 28 percent in 2013, snapping a 12-year run of gains, as the Fed looked set to unwind its bond-buying stimulus, which had supported prices.