Gold was little changed on Wednesday but analysts expect further gains after a retreat in the dollar and signs of healthy physical demand.
Gold had the potential to claw higher in the short term after the dollar pulled back from near nine-month highs and due to increasing appetite from speculators, one analyst said.
"We've seen the dollar rally halted and that may give gold some additional room to maneuver to the upside, so I'm quietly constructive for gold," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"Outside markets are supportive - we're seeing weakness in stock markets, oil is trading lower and the dollar is a tad weaker."
Spot gold was down about 0.5 percent at $1,266.62 an ounce. In the previous session, it hit $1276.67, its highest since Oct. 5.
U.S. gold futures settled down 0.5 percent at $1,266.60 an ounce.