Gold settled higher on Wednesday as the dollar pared gains after weaker than expected U.S. economic data, although stronger European shares limited the upside.
, lower initially, closed up $8.70 at $1,201.3 an ounce. It had fallen as much as 1.2 percent to a two-week low of $1,183.68 on Tuesday.
The dollar cut initial gains and was unchanged against a basket of currencies, after data showed U.S. industrial output fell 0.6 percent in March.
"The dollar's retreat is mainly due to the weak U.S. economic data ...as long as we have weak economic figures out of the U.S., it is less likely that the Fed will start raising interest rates sooner rather than later," Commerzbank analyst Daniel Briesemann said.
The U.S. currency also lost ground against the euro after the European Central Bank (ECB) said it expects euro zone economic recovery to broaden and strengthen and ruled out a cut to deposit rate.
Gold's rebound on Wednesday was however capped by stronger European shares, hitting a 14-year high.
"Gold is having to really compete with other financial assets that offer yields," Societe Generale analyst Robin Bhar said.
"There is still a lot of work for gold to do on the upside, there are too many headwinds at the moment and I don't think that is going to change quickly."
The Federal Open Market Committee (FOMC), which meets on April 28-29, will be closely watched for clues on when the U.S. central bank could raise interest rates.
Read MoreGartman: Gold is going higher
A U.S. rate increase, which would be the first in nearly a decade, dims gold's appeal as it does not pay interest.
Data showing China's economy grew 7 percent in the first quarter, the slowest in six years, suggested that physical demand from the world's No. 2 consumer would remain tepid this year.
Premiums for physical gold on the Shanghai Gold Exchange picked up to $3-$4 an ounce over spot from just above a dollar earlier this week, although analysts say a slowing economy could cap Chinese demand.
"Given structural reforms and all this belt-tightening because of the perceived slowdown, I don't think there'll be much demand for gold for jewellery or for investment," said Howie Lee, an analyst at Phillip Futures.