Gold edged up on Thursday but remained close to a four-month low, hurt by fears the U.S. Federal Reserve might be able to start scaling back its stimulus programme soon.
In the Oct. 29-30 Fed policy meeting minutes released on Wednesday, officials indicated that they could decide to start reducing the asset purchases at one of their next few meetings provided this was warranted by economic growth.
Many in the markets took that to mean the programme could be trimmed earlier than consensus forecasts, which had been pointing to March.
"This highlights the fact that the market believed there will be no tapering this year and now the Fed says that is not really discounted," Societe Generale analyst Robin Bhar said.
"The central banks want to keep the market guessing and that uncertainty weighs on the gold price."
Spot gold was up 0.4 percent to $1,247.26 an ounce by 1049 GMT. It hit a four-month low of $1,240.69 on Wednesday, when it fell 2.5 percent, posting its biggest daily loss in seven weeks.
U.S. gold futures for December delivery fell 0.9 percent to $1,246.60 an ounce.
The dollar hit its highest in nearly a week against a basket of major currencies.
A stronger U.S. currency makes dollar-denominated assets like gold more expensive for foreign investors.
Data on Wednesday supported the idea that Fed tapering could begin soon, as a gauge of U.S. consumer spending rose more than expected in October.
Recent U.S. economic data are looking better and a solid jobs report for November would increase the likelihood that the Fed would start to scale back bond buying at its meeting next month, St. Louis Fed President James Bullard said.
Gold has been boosted by the U.S. central bank's quantitative easing measures, hitting an all-time high of $1,920 an ounce in 2011, as increased financial liquidity and a low interest rates environment encouraged investors to put money into non-interest-bearing assets.
But a recovery in the U.S. economy this year has prompted the Fed to consider rolling back its stimulus and bullion has lost about a quarter of its value so far in 2013.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 2.70 tonnes to a four-and-a-half-year low of 860.31 tonnes on Wednesday.
Physical demand in Asia picked up due to the lower price levels, but not to a great extent, according to dealers.
"Demand has picked up but not in a way that we expected. Consumers are waiting for (prices) to go down further and are holding off big purchases," said a Singapore-based dealer.
Silver rose 0.8 percent at $19.94 an ounce, having touched its lowest since mid-August on Wednesday.
Spot platinum rose 0.5 percent to $1,396.20 an ounce, while spot palladium gained 0.9 percent to $715.47 an ounce.
Switzerland's palladium imports rose to a five-month high in October, data from the Swiss customs office showed, after those from Germany climbed to their highest in 3-1/2 years.