Gold rose on Thursday as European and U.S. stock markets retreated, though it pared gains after data showing a tightening jobs market and accelerating inflation lifted the dollar and pulled U.S. bond yields from earlier lows.
The metal is consolidating after sliding to its lowest in eight weeks on Tuesday at $1,213.81, analysts said.
Spot gold rose 0.40 percent to $1,223.51 per ounce, following eight sessions in which prices have been flat or fallen.
"It looks like gold is following stocks and the U.S. dollar, but overall I would say it may have found a bottom, at least for the time being," Afshin Nabavi, head of trading at MKS in Switzerland said. "All we need is some good physical demand."
Some physical buying has come through of late, he said, but not as much as would have been expected given the price drop.
"Premiums have been rather poor," he said.
U.S. gold futures for June delivery also gained $5.30 to settle at $1,224.20 an ounce.
Analysts at ScotiaMocatta said the metal would struggle to rise above technical resistance at its 100-day moving average, now at $1,226. Support for the metal was at $1,195, they said.
Expected interest rate rises this year by the U.S. Federal Reserve will put pressure on bullion, ABN Amro analyst Georgette Boele said.
"There is a risk that gold may go to $1,200 in the coming weeks or months. But that would only be temporary," she said, forecasting a weaker dollar later in the year.
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.
Platinum producer Lonmin said on Thursday protesters demanding jobs were disrupting output, damaging property and intimidating employees around its Marikana operations in South Africa. That lent little support to prices, however.
Palladium was up 0.25 percent at $799.98 an ounce. The metal used in the automotive industry for emission-controlling catalytic converters is around two-year highs, but Commerzbank analyst Carsten Fritsch said recent car sales had disappointed.
"This points to lower demand for palladium if China and the U.S. - the two leading demand markets - show continued weakness," he said in a note.
Chinese auto sales posted their steepest fall in almost two years in April, the automakers' association said on Thursday, as a tax increase on small-engine cars from the start of the year discouraged buyers.