Gold clawed higher on Thursday, propelled by a weaker dollar, short-covering and physical buying in Asia.
Worries about new U.S. trade tariffs on China cast a cloud over the market, however.
"We're seeing a little bit of a relief rally for the precious metals," said Chris Gaffney, president of world markets at TIAA Bank.
The relief bounce and gold's strong oversold conditions are leading some investors to short-cover, said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
"The bottom is very close because I think the U.S. dollar is close to reaching the top, together with the peak of the U.S. economy," he said.
Spot gold gained 0.3 percent at $1,200 per ounce, after rising 0.5 percent in the previous session.
U.S. gold futures futures for December delivery settled up $3, or 0.3 percent, at $1,204.30 per ounce.
Gold has tumbled more than 12 percent from a peak of $1,365.23 in April. The price levels have recently sparked a lot of physical buying, not just in active gold-buying countries like India and China but also in Southeast Asia for investment purposes, traders and analysts said.
India's gold imports more than doubled in August to their highest level in 15 months as lower prices prompted manufacturers to replenish inventory.
China's yuan weakened against the dollar on Thursday as investors braced for more sweeping tariffs expected soon from Washington, making gold expensive for buyers in the world's biggest consumer, traders said.
Gold has been under pressure for most of this year on rising interest rates, global trade tensions and an emerging-market currency crisis, with investors parking their money in the dollar, undermining the metal's safe-haven status.
The dollar fell against a basket of six major currencies .
"I don't expect a sharp move from either gold or the dollar. I think we'll be stuck here for a little while, barring any major event," Gaffney added.
Markets will closely watch a U.S. employment report due on Friday for clues about the pace of interest rate increases by the Federal Reserve.
"This week's non-farm payrolls data could strengthen the dollar further and push gold down. But it is likely to take support near $1,140," said Hareesh V, head of commodity research at Geojit Financial Services.