Gold extended its gains on Friday, buoyed by a dip in the dollar and U.S. Treasury yields after data showed U.S. retail sales unexpectedly stalled in April.
Spot gold was up 0.7% at $1,838.57 per ounce by 12:49 p.m. (1649 GMT), heading for a second week of gains. U.S. gold futures climbed 0.8% to $1,837.80.
Dollar and real yields "need to remain supportive for gold to rise in the near term," said Suki Cooper, an analyst at Standard Chartered.
"Barring short-term corrections, a dovish Fed and rising inflation expectations are likely to keep gold price risk skewed to the upside over the course of the year."
The yield on benchmark 10-year U.S. Treasury notes fell, bolstering the appeal of non-yielding gold. The dollar index shed 0.4%, making bullion cheaper for those holding other currencies.
"Disappointing (retail sales) data also opened the gate for gold prices to challenge the next hurdle around $1,850/oz," Cooper added.
Other key U.S. economic readings this week showed a bigger-than-expected rise in consumer prices and a drop in weekly jobless claims to a 14-month low, intensifying concerns over rising inflation and prospects of higher interest rates.
Federal Reserve officials, however, have maintained they expect any rise in inflation to be short-lived, while pledging to keep rates low until the economy reaches full employment.
"The Fed is not going to throw the economic recovery off course by raising rates," StoneX analyst Rhona O'Connell said. "There's too much risk involved to start either aggressive tapering or raising rates because there is not enough underlying strength in the economy."
"We've got global issues, and particularly with uncertainties over places like Brazil and India," she said, referring to the two countries now reporting the highest number of new daily COVID-19 infections and deaths.
India's total tally of coronavirus infections climbed past 24 million on Friday, with widespread restrictions also taking a toll on physical gold demand.
Elsewhere, palladium rose 1.2% to $2,897.28 per ounce