Gold swung higher on Thursday, snapping four sessions of losses as the dollar surrendered early gains, though the metal remained on track for its biggest weekly decline this year.
Spot gold was 0.37 percent higher at $1,328.81 an ounce by 11:09 a.m. EST, off an earlier low of $1,320.61 but still down 1.8 percent this week. U.S. gold futures for April delivery were down 0.07 percent at $1,331.10.
"The U.S. dollar is losing some value and the euro is making a comeback," said Afshin Nabavi, head of trading at MKS. "I think the market went short on the back of yesterday's FOMC (minutes). However a lack of follow-through (buying) below $1,320 ... once again brought some short-covering."
The dollar index, which measures the greenback against a basket of major currencies, was down 0.21 percent at 89.81 after touching 90.235, its highest since Feb. 12.
The U.S. currency's boost had been after the minutes of the Fed's January meeting showed that most policymakers believed inflation would perk up.
Gold is highly exposed to interest rates, particularly in the United States, because rate rises lift the opportunity cost of holding non-yielding assets and boost the dollar, in which gold is priced.
"The general tone of the FOMC minutes was hawkish and convinced about the strength of the U.S. economy and that the inflation target will be reached," said Commerzbank analyst Carsten Fritsch. "This was seen as a further sign that Fed is willing to increase interest rates further and more than expected."
However, some analysts said concerns about rising inflation may be tempered by caution over recent market volatility.
The opposing forces of higher inflation, which is good for bullion, and higher interest rates should neutralize each other and keep gold price pretty steady, analysts said. A break of the $1,322-25 area, however, could see gold test the 50-day moving average of $1,319.25 then the 100-day moving of $1,298.50 if dollar strength persists, MKS said in a note.