The precious metal had pared its gains after touching a two-week high on Thursday, after Republicans in the U.S. House of Representatives unveiled legislation to overhaul the U.S. tax system.
The dollar fell and U.S. 10-year Treasury yields slid to two-week lows after House Republicans proposed to slash the corporate tax rate to 20 percent from 35 percent and reduce the number of tax brackets for individuals.
"There was a slight bit of volatility around the time of the tax cut announcement," said Dan Hussey, senior market strategist at RJO Futures in Chicago, adding this caused gold prices to come off their highs.
Lower bond yields make non-yielding gold more attractive to investors, while a weaker dollar makes bullion cheaper for holders of other currencies.
Spot gold rose 0.17 percent to $1,276.12 an ounce by 3:39 p.m. ET, after touching $1,284.10, the highest since Oct. 20.
U.S. gold futures settled up $0.80, or 0.1 percent, at $1,278.10 per ounce.
Markets are pricing a 97 percent likelihood of a rate increase in December, according the CME Fedwatch tool, and the pace of subsequent rises could be faster if the Republican tax proposal was enacted and succeeded in speeding economic growth.
Investors hedging against the stock market possibly overheating also drove gold prices up, said Miguel Perez-Santalla, vice president of Heraeus Precious Metals in New York.
Gold rose above its 100-day moving average at $1,275.62 but indicators suggested prices would fall, analysts said.
"Gold continues to weigh on the downside and still implies a test of the current October low and the 200-day moving average at $1,260.55/$1,260.89," said Commerzbank technical analysts.
In other precious metals, silver was down 0.18 percent at $17.09 an ounce, after touching $17.24, its highest since Oct. 20.