A weaker greenback supports gold since the dollar-priced commodity is less expensive for investors holding other currencies. China's economy expanded faster-than-expected in the second quarter, setting the country on course to comfortably meet its 2017 growth target.
"Investor sentiment (for gold) has improved quite dramatically over the past week, especially with the weak data out of the United States last week," said ANZ analyst Daniel Hynes. "Gold is now primed for another rally."
On the technical front, gold is likely to significantly break above key resistance at the 200-day moving average near $1,230 per ounce and could even rise to the $1,250 level in the shorter term, Hynes said.
"The technical bounce looks fairly solid," he said. Spot gold may gain further to $1,239 per ounce, as it has cleared resistance at $1,226, according to Reuters technical analyst Wang Tao.