Gold edged lower on Thursday, weighed down by a firmer dollar, while palladium hit its highest price in two years, helped by economic data.
Spot gold dropped 0.29 percent to $1,245.29 per ounce, retreating from an intraday peak of $1,253.12, its highest since Feb. 28.
U.S. gold futures for April delivery were $2.50 lower to settle at $1,247.20.
"The most important reason is that the dollar is stronger and yields in the U.S. are edging a little higher. Later in the year I expect prices to move higher, but for the moment $1,250 is the top end of the range," said ABN Amro commodities strategist Georgette Boele in Amsterdam.
The dollar index, which measures the greenback against a basket of currencies, was up 0.11 percent at 99.78. It fell to a near seven-week low of 99.547 on Wednesday.
The dollar briefly slipped on Thursday after U.S. jobless claims rose unexpectedly, sending gold temporarily higher.
But with jobless levels still below a level associated with a strengthening labor market, and data later showing U.S. new homes sales hitting a seven-month high, the dollar and gold largely returned to previous levels.
OCBC analyst Barnabas Gan pointed to the impact of sustained political issues in Europe and the United States.
"This kind of uncertainty does lift gold prices," he said. The immediate focus is on whether U.S. President Donald Trump can gather enough support to pass a bill to roll back Obamacare, representing a major test of his legislative ability and whether he can keep his promises to business.
A rough ride for the healthcare plan could affect Trump's efforts to cut taxes and boost infrastructure, with the potential to drive more investors to gold as a safe-haven if stock markets fall, analysts and traders said.
"A sustained break and close above $1,250 will be the key for a test of the 200-day moving average at $1,259.50, while support initially sits at $1,244-$1,245," said MKS PAMP Group trader Sam Laughlin.
Palladium, meanwhile, climbed to a peak of $808.70 — its highest since March 10, 2015 — before paring gains to $802 for a rise of 1.97 percent.
"Palladium has a completely different dynamic (to other precious metals)," Boele said. "It is far more related to economic data releases, the expectations for the economy, both emerging and developed."
The European Central Bank said on Thursday that economic recovery in the eurozone was gaining ground while data last week indicated strong U.S. factory output, a rebound in U.S. consumer sentiment and a rise in European car sales in February.
Palladium is mainly used in catalytic converters that curb pollution from vehicle exhausts.