Gold wilted slightly from its highs on Wednesday after the U.S. Federal Reserve released notes from its most recent meeting showing central bankers largely hopeful about the direction in which the economy was headed.
The metal had surged more than 1 percent as concerns over escalating tensions in Syria, U.S. sanctions on Russia and the U.S.-China trade stand-off weighed on stock markets and the dollar index.
Palladium, which has also benefited from expectations that sanctions on Russia could hurt supply, rose further after climbing nearly 6 percent in the past two days.
"We've seen fears of a trade war and now more recently the Russian sanctions," said Capital Economics analyst Simona Gambarini. "Uncertainty, volatility and geopolitical risk have been rising steadily since the start of the year."
That has sparked good demand for gold through products such as bullion-backed exchange-traded funds, she said. "Gold is benefiting from the risk-off sentiment and because people are trying to hedge against worst-case scenarios."
European equities fell after two days of gains as tensions over Syria and U.S. sanctions drove Russia's rouble to a two-year low, while concerns about the prospect of a trade war boosted traditional safety plays at the dollar's expense.
The U.S. unit languished near a two-week low against a basket of currencies. Gold is often perceived as a safe store of value during times of political and financial uncertainty.
Gold has been caught within a trading range between $1,300 and $1,360 since the end of January. The metal needs to break that resistance to make a sustained move out of its current range, Afshin Nabavi, head of trading at MKS, said.
The metal, more than 40 percent of which is produced in Russia, has bounced strongly this week as sanctions against Moscow fed into a technically driven rebound after the first quarter's 10 percent slide.
Although Russian output of the metal has not been affected directly, the sanctions have caused enough concern over supply in a market that has been in deficit for a decade to bring some speculative money back in, analysts said.