Gold was flat after sliding to a fresh 2018 low on Thursday as another rise in U.S. bond yields and concerns over political risk in Italy held the dollar index near its 2018 peak.
The precious metal has fallen more than 2 percent this week on gains in the U.S. currency and a rise in U.S. 10-year Treasury yields to seven-year highs. Higher yields increase the opportunity cost of holding non-yielding assets such as bullion.
But gold got some support from geopolitical strife in North Korea.
The dollar has climbed nearly 4 percent this quarter on expectations the U.S. Federal Reserve will lift U.S. interest rates further this year to curb inflation, at a time when other central banks are still keeping monetary policy loose.
"The dollar and the interest rates are what's really driving gold," said Chris Gaffney, president of world markets at Everbank. "Gold has further down to go, because the dollar has room to go higher."
The euro remains under pressure, hovering near a five-month low on concerns that political developments in Italy could cause wider disruption in the common currency bloc.
Political uncertainty arising out of North Korea after Pyongyang threatened to pull out of a meeting with the United States was likely to limit downside for gold, analysts said.
Market watchers, unsure if the U.S. Federal Reserve will be able to aggressively hike rates and concerned about political uncertainty, lent support to gold prices, said Ryan McKay, commodity strategist at TD Securities.
But gold "still remains vulnerable to the prevailing dollar and rate headwinds," INTL FCStone said in a note.
From a technical perspective, gold prices were looking vulnerable to further losses after breaking below key chart levels this week, according to analysts who study past price moves to determine the future direction of trade.
"Gold has eroded key support, namely the 200-day moving average, the $1,302.74 March low and the 50 percent retracement (of the December-to-January rally)," Commerzbank said in a note on technicals. "We have been forced to neutralize our outlook as the market is now on the defensive."