Gold hit a six-week high on Thursday before being pressured by the dollar's bounce on solid U.S. economic data. Traders digested the Federal Reserve's Wednesday statement that showed it was closer to paring its balance sheet.
The U.S. central bank appeared less confident than it had about inflation picking up but said it expected to start winding down its massive holdings of bonds "relatively soon" in a sign of confidence in the U.S. economy.
Spot gold peaked at $1,264.99, its highest since June 15 before trading 0.15 percent lower at $1,258.66 an ounce by 4:35 p.m. New York time.
U.S. gold futures for August delivery settled up 0.84 percent at $1,260, after falling in the prior session before the Fed released its statement.
The dollar turned higher after data showed shipments of key U.S.-made capital goods increased in June for a fifth straight month.
The resulting rise in the greenback pressures dollar-denominated gold since it makes the metal more expensive for investors paying in other currencies.