Gold edged higher on Thursday, snapping two sessions of losses that pulled it back from 3-1/2 month highs, as a retreat in stock markets after weak French and Chinese data boosted its appeal as an alternative asset.
The metal has fallen nearly $20 an ounce in the last two days as higher prices curbed physical demand and after minutes of the Federal Reserve's latest policy meeting reassured markets that it would keep cutting monetary stimulus.
It remains underpinned near current levels, however, as buyers of physical gold in Asia stepped in to buy on dips, and as the soft economic data undermined equities.
Spot gold was up 0.2 percent at $1,313.09 an ounce at 1106 GMT, while U.S. gold futures for April delivery were down $6.70 an ounce at $1,313.70. It hit its highest since October 31 this week at $1,332.10, before traders cashed in gains.
"Gold is trading in a tight range," Commerzbank analyst Daniel Briesemann said. "We have seen some profit taking, but it's finding some support from the weak economic data we've had, so overall there's a balance here."
Shares fell and the safe-haven yen rose on Thursday after surveys showing factory activity slowing in China and stuttering in Europe highlighted the fragility of the global economic recovery.
The dollar held firm, meanwhile, keeping a lid on gold, after minutes of the U.S. Federal Reserve's latest policy meeting showed the central bank would keep trimming its asset-purchase programme.
The Fed's monetary stimulus programme was a major factor driving gold to record highs in the wake of the financial crisis, as it kept up pressure on interest rates while stoking fears over inflation.
Expectations that the Fed was set to rein in stimulus was a key factor driving gold prices down 28 percent last year.
ASIAN BUYERS STEP IN AS PRICES FALL
On the physical market, premiums for gold bars in Singapore were steady from last week at $1.20-$1.50 an ounce to spot London prices. Dealers noted buying from jewellers in Indonesia, while Thailand sold some scrap to Singapore.
Dealers expected jewellers across Asia to buy on dips while India's plan to keep tax on gold imports at current levels could underpin sentiment in the physical market as it will lead to more smuggling.
The top five recipients of Swiss gold exports in January were in Asia, with Hong Kong the top destination for shipments out of Europe's leading refining centre, data from the Swiss customs office showed on Thursday.
Premiums for gold bars were also steady in Hong Kong at $1.30 to $1.70 to the spot London prices.
"I've got some light demand from Indonesia but it's more for factories and not for investment. Thailand has been quite slow since the beginning of last week," said a dealer in Singapore. "Business in Thailand has been hit by the unrest."
A Thai court on Wednesday endorsed Prime Minister Yingluck Shinawatra's declaration of a state of emergency, a day after five people were killed in gun battles in Bangkok, but warned the government not to use it to disperse peaceful protesters.
Among other precious metals, silver was up 0.5 percent at $21.62 an ounce. Spot platinum was down 0.4 percent at $1,407.50 an ounce, while spot palladium was down 0.3 percent at $728.90 an ounce.
South Africa's Association of Mineworkers and Construction Union (AMCU) vowed on Thursday to continue a strike against the world's top three platinum producers, which its president described as a "fight for survival" by workers.