Gold prices rose on Tuesday, reversing earlier losses after a weaker dollar and falling stock markets spurred safe-haven buying of the precious metal.
Spot gold was up 0.36 percent at $1,278.06 per ounce, while U.S. gold futures settled up 0.2 percent at $1,276.9.
Profit-taking led to a drop in gold prices earlier in the session, as stock markets temporarily edged higher.
European shares hit a two-week high, bolstered by a rally in mining stocks, but eased later in the session. The dollar slipped to trade 0.06 percent lower against a basket of six major currencies, giving a boost to gold.
A weaker U.S. currency makes dollar-denominated gold cheaper for holders of other currencies.
Gold has rallied 20 percent this year on speculation the Federal Reserve has slowed its expected pace of rate increases on concerns about global economic growth and the volatility of stock markets.
"Gold has been supported as of late as the ongoing theme over the several sessions has been economic global concerns, and that has been a driver behind that safe haven demand for gold," said David Meger, director of metals trading for High Ridge Futures in Chicago.
But on Tuesday, two Fed officials said that the U.S. central bank could raise short-term interest rates at its meeting next month.
Dallas Federal Reserve Bank President Robert Kaplan said the U.S. economy is strong enough to justify an interest-rate hike in the "not too distant future," but increases will be very gradual.
Gold gave up some of its gains in the wake of the comments.
"We're still trying to gauge the likelihood of a Fed rate hike..the next portion of that decision is going to be seen from the Fed minutes tomorrow," Meger said.
The U.S. government reported earlier on Tuesday that consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, pointing to a steady inflation build-up that is seen as giving the Fed ammunition to raise interest rates later this year.
U.S. regulatory filings on Monday showed some influential investors, including billionaire financier George Soros, bought into gold through exchange-traded funds in the first quarter.
Soros, who once called gold "the ultimate bubble," returned to the world's biggest gold exchanged-traded fund (ETF) after a three-year absence, buying 1.05 million shares in SPDR Gold Trust for about $123.5 million.
Soros returns
His move buoyed the gold market early in Tuesday's session. SPDR Gold Trust's assets have been rising steadily this year and are at their highest level since November 2013.
But long-time gold bull John Paulson cut his bets on bullion.
Spot silver was up 0.58 percent at $17.23 per ounce, spot platinum was up 0.43 percent at $1,049.50 per ounce and spot palladium lost 0.81 percent to touch $584.70 an ounce.
The platinum/palladium ratio has reached its highest point in about a month this week, as it resumes a slow climb higher after reaching its lowest level since 2002 in October. An ounce of platinum now buys 1.78 ounces of palladium, up from 1.64 ounces at the start of the year.