Gold was on track for a 8.2 percent quarterly rise on Friday, its best quarter in a year, as uncertainty over President Donald Trump's tax and investment plans and a series of elections in Europe fuelled demand for bullion as a safe haven.
Spot gold was up 0.56 percent at $1,249.89 per ounce. U.S. gold futures for April delivery rose $2.30 to settle at $1,247.30. Gold futures for June delivery gained $3.20 to settle at $1,251.20.
It was on track to end the week down 0.2 percent.Though well ahead on a quarterly basis, gold fell 0.7 percent on Thursday, its biggest one-day drop in more than three weeks, after a failure to break resistance at its 200-day moving average triggered technical selling.
"In the short term, factors including a strengthening dollar could pull prices down to around $1,230 an ounce," said Yuichi Ikemizu, head of commodity trading at Standard Bank in Tokyo.
The dollar was on course for its best week this year, helped by better-than-expected U.S. economic growth data and comments by the president of the New York Federal Reserve that reinforced expectations of U.S. interest rate hikes this year.
Data showing the largest annual increase in U.S. inflation in nearly five years and comments by the president of the New York Federal Reserve meanwhile reinforced expectations of U.S. interest rate hikes this year.
A stronger dollar makes bullion more expensive for holders of other currencies, while higher interest rates lead to higher bond yields and dampen demand for non-yielding gold.
But gold is underpinned in the coming months by doubts over Trump's ability to enact tax cuts and investment spending and an uncertain political outlook in Europe.
"The fear trade has driven the market so far this year," said David Govett at Marex Spectron.
The buying as a haven from risk, plus a recovery in Indian buying, are likely to push prices to an average $1,259 an ounce this year, GFMS analysts at Thomson Reuters said in their Gold Survey 2017, published on Friday.
A failure by Trump to make progress on his stimulus plans would reduce the chances of a rise in U.S. interest rates in June, Tom Kendall at ICBC Standard Bank said in a note.
"That in turn would likely give gold the impetus to break up through $1,300 again," he said.
In other precious metals, spot silver was up 0.72 percent at $18.21 an ounce, having touched $18.29, its highest in four weeks, in the previous session.