Gold touched a near-four week high on Wednesday as the dollar edged back from a 14-year peak and physical demand from major consumers China and India increased.
Spot gold climbed to its highest since Dec. 9 at $1,167.52 an ounce and was up 0.27 percent at $1,161.61. U.S. gold futures climbed $4.20 to $1,166.10 an ounce. It was last up 0.04 percent at $1,162.5 an ounce.
"The dollar index has consolidated and the big outflow from exchange-traded products (ETPs), which has been the biggest headwind for gold in the past few months, has stopped recently," Julius Baer analyst Carsten Menke said.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 1 percent to 813.87 tonnes on Tuesday. Holdings are down about 14 percent since the U.S. presidential election in November.
"It is too early to tell if we are going to have a stabilization in the holdings because the fundamental backdrop hasn't really changed and we are still in this positive post-Trump election environment where we are hoping for better in the States, a stronger dollar and higher interest rates," Menke said.
The dollar index fell back from its highest level since late 2002, hit after U.S. manufacturing data beat expectations on Tuesday. A weaker dollar increases demand for commodities priced in the greenback by making them cheaper for holders of other currencies.
"If the (U.S.) rate hike frequency picks up we are likely to see bond prices rise further, that would in turn encourage investors to switch out of ETFs into alternative assets," said NAB analyst Vyanne Lai.
The Chinese New Year holiday in the first quarter of 2017 is likely to result in some physical restocking of metal there, analysts said.
"Physical demand from China and India is quite strong at the moment," NAB's Lai said. "With the upcoming Chinese New Year there is a seasonally strong period for jewellery and in India the shortage of cash has prompted some safe-haven buying from Indian consumers as source of wealth."
Gold imports to Turkey rose to 36.7 tonnes in December, their highest monthly level in just over two years, data from the Istanbul bourse showed on Wednesday.
Silver was up 0.13 percent at $16.43 an ounce, after hitting near three-week highs in the last session.
Platinum rose to four-week highs of $948.40 an ounce, extending a 4 percent increase in the previous session.
Palladium gained 3 percent to $730.45 an ounce, having climbed 4.5 percent on Tuesday. The metal is mostly used to clean up exhaust emissions from gasoline vehicles.
"It is possible that some market participants have been buying palladium in particular in anticipation of record-high vehicle sales in the U.S.," Commerzbank said in a note.