Gold closed at a three-month high on Thursday as the dollar came under pressure following a new batch of mixed U.S. data that pushed back expectations of when interest rates in the world's largest economy will rise.
Initial claims for state unemployment benefits slipped last week close to a 15-year low reached last month, but other data showed that a strong dollar and lower oil prices suppressed producer inflation in April.
U.S. gold futures for June delivery settled up $7.00 at $1,225.20 an ounce, its highest since February 13.
Spot gold rose to the highest since Feb. 17 at $1,226.20 an ounce and was trading up 0.5 percent at $1,221.83 an ounce.
A close above the $1,225 area was expected to trigger sustained buying interest, MKS SA head of trading Afshin Nabavi said.
The metal was also heading for its biggest weekly gain in five months, mostly aided by an almost 2 percent increase on Wednesday after the dollar first tumbled to three-month lows, after flat U.S. retail sales releases.
"I'm forecasting gold to average $1,200 this quarter, as a slightly weaker dollar will continue to be supportive until we see some stronger data points," Citigroup strategist David Wilson said.
"Only a rebound in employment data will start triggering talks about an imminent interest rate hike again because now expectations have been dampened."
The dollar was down 0.1 percent against a basket of leading currencies, making gold cheaper for holders of other currencies.
The metal shrugged off strength in global equities, which would generally dampen its appeal as a hedge against risk.
Gold had dropped when strong data last year heightened views that the Federal Reserve would raise interest rates from record lows, starting in June.
But U.S. growth in the first quarter slowed to a crawl. The Federal Reserve has said it would raise rates only when data points to a strengthening economy.
Bullion could also find some support from the prospect of a disruption to supply in South Africa because of a labor dispute over pay.
An industry report released on Thursday showed that global gold demand eased one percent in the first quarter, due to a drop in Chinese jewelry demand.
Despite the drop, China was the world's biggest consumer of gold in the first quarter, well above India.
—CNBC contributed to this report.