Gold prices rose to an 11-week high on Thursday after the U.S. Federal Reserve gave no clear signal on the likelihood of a March interest rate increase in its latest statement, prompting another drop in the U.S. dollar.
The slipped to the lowest since mid-November against a basket of currencies, but gold pared gains as the dollar turned positive later in the session.
"Gold... successfully traded through its resistance at $1,220," Heraeus trader Alexander Zumpfe said. "If it closes above there, the short-term uptrend is back and a test of $1,235 might be on the cards."
The weakening dollar was the main factor driving gold higher, along with concerns about political risk, Afshin Nabavi, head of trading at MKS, said.
"Gold has benefited on the back of yesterday's FOMC meeting and recent U.S. policy statements," said RBC Capital Markets in a research note.
"Overall, this provides further support to our view that gold is likely best bought as a risk overlay this year. We are not necessarily a buyer at current levels and prefer buying on likely dips."
U.S. non-farm payroll data for January will be closely watched on Friday. The report is seen as a key barometer of the health of the U.S. economy and will be examined for signs that growth is strong enough to support further interest rate hikes.
Gold is highly sensitive to rising U.S. rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
Investors' interest in gold rose after the U.S. currency suffered its worst January in 30 years. The world's largest gold-backed exchange-traded fund, SPDR Gold Shares, reported its biggest one-day inflow in nearly four months on Wednesday, of 10.7 tonnes.
That has helped to support gold despite the absence of many Asian buyers because of the Lunar New Year holiday this week.
"The sharp rebound after a pull down below $1,200 and the Asian pricing model, despite the Chinese New Year, seem favorable," said Spencer Campbell, general manager with Kaloti Precious Metals in Singapore. "We see a lot of bullish signals."
Palladium was down 0.81 percent at $756.22.