Gold pared gains on Thursday after stronger-than-expected U.S. data lifted the dollar and impetus from Chinese buying petered out, but it remained higher after the Federal Reserve indicated this week that it was in no rush to raise interest rates.
The dollar rose against a currency basket as data on U.S. durable goods orders in January beat forecasts, boosting confidence in business activity despite worries of the recent surge in the dollar hurting exports.
That weighed on gold, which is priced in the U.S. unit.
Spot gold was up 0.5 percent at $1,210 an ounce. Earlier it hit a session high of $1,220.00 above the 100-day moving average at $1,216.20, before retreating as the dollar firmed.
"The market feels a bit top heavy," MKS head of trading Afshin Nabavi said. "We've had good buying of physical gold from the Far East as China opened up after the Lunar Week holiday, but above $1,210-1,212, that stopped."
Gold prices have fallen around 10 percent over the last year, largely due to the prospect of higher U.S. rates, which would increase the opportunity cost of holding non-yielding bullion, while boosting the dollar.
The metal rose strongly earlier this week after Fed chair Janet Yellen indicated that the U.S. central bank was in no rush to hike interest rates, leading some analysts to shift expectations for the first U.S. rate hike since 2006 to September or later this year.
"The combination of China returning, Yellen pushing the can further out, bond yields lower and exchange-traded product demand picking up has helped create a floor (for gold)," Saxo Bank's head of commodity strategy Ole Hansen said.
U.S. gold for April delivery settled $8.60 higher, at $1,210,10 an ounce.
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Premiums on the Shanghai Gold Exchange remained firm around $4-$5 an ounce over the global spot price as buyers returned to the market after the Feb. 18-24 holiday in China.
Data showed on Thursday that China's gold imports from Hong Kong rose in January from the previous month, reflecting increased demand ahead of the Lunar New Year. Net gold imports from Hong Kong climbed to 76.118 tonnes last month from a three-month low of 71.381 tonnes in December.
Other precious metals also advanced, with spot palladium rising to its highest since Jan. 14 at $815.35 an ounce.