Gold held on to most of the previous session's sharp losses on Friday as strong US retail data stoked fears of an early end to monetary stimulus and fund outflows accelerated.
The metal is headed for its first annual decline in 13 years as investors, buoyed by a recovering global economy, direct more money towards riskier assets such as equities by pulling funds from safe-haven gold.
"It's very difficult to build any meaningful strength in the gold markets given continuing outflows from the ETFs," said Mark Keenan, head of commodities research for Asia at Societe Generale, referring to gold-backed exchange-traded funds.
"Its pretty much been ETF flows that have driven the sentiment in price direction this year. There is very little in the way of factors that could pull gold prices higher."
Spot gold rose 0.3% to $1,227.10 an ounce by 0333 GMT, after falling more than 2% on Thursday to a low of $1,223.30. Silver slipped after a 4% drop overnight.
Overall investor interest remained lacklustre, with outflows from gold-backed ETFs at record levels.
Holdings in SPDR Gold Trust, the biggest gold ETF, fell the most in nearly two months on Thursday. The fund has not seen inflows in more than a month, hinting that a substantial upside in prices is limited.
Gold price movements have been volatile this week, oscillating between losses following strong U.S. data and rallies from short covering.
Data on Thursday showed a strong rise in U.S. retail sales in November, adding to signs of an improving economy that could prompt the Federal Reserve to begin cutting back its stimulus soon.
Traders were worried that a decision to roll back stimulus could come as early as the central bank's meeting next week.
Thursday's price fall brought back some Asian buyers, especially in China.
Premiums on the Shanghai Gold Exchange for 99.99% purity gold picked up to $8 an ounce from $7 in the previous session.