Gold inched up on Thursday after falling more than 1 percent in the previous session, but the metal was still under pressure as investors eye an eventual pullback in the U.S. Federal Reserve's stimulus programme.
Bullion has slipped more than 20 percent this year, losing its safe-haven appeal after the U.S. central bank signalled it would look to rein in its $85 billion in monthly asset purchases later this year and halt stimulus altogether by mid-2014.
The Fed's three quantitative easing schemes have buoyed prices of gold and other commodities. Fed Chairman Ben Bernanke said on Wednesday the central bank still expects to start scaling back bond purchases later this year, but he left open the option of changing that plan if needed.
Gold hit a high of $1,278.86 an ounce and stood at $1,275.61 by 0641 GMT, little changed from Wednesday. Prices were well below an all time high around $1,920 in 2011.
"We should still expect bond buying to be scaled, but maybe not that soon," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.
"We expect to see more downside in gold. I am looking for gold to break below the July 12 low around $1,267 an ounce."
Bernanke will testify before the Senate Banking Committee later on Thursday, but is likely to stick to the theme laid out on Wednesday.
U.S. gold futures were at $1,274.70 an ounce, down $2.80.
Gold's recent weakness attracted buying in the physical sector, keeping premiums for gold bars steady in Singapore at $2.50 to $3 an ounce to spot London prices..
But demand from top consumer India has been muted after the government raised its import duty and stopped consignment imports, cutting imports by 81 percent in June.
Bullion is second only to crude oil in India's import bill, which the government wants to cut back to ease the current account deficit and help the weak rupee back on its feet.
"There's some buying, although I wouldn't say the quantity is big. Gold hasn't really fallen a lot anyway," said a physical dealer in Singapore.
"Hong Kong is still doing well, with premiums at $3.50 to $5 because of demand from China."
Physical deliveries from the Shanghai Gold Exchange in the first half of 2013 exceeded total deliveries for all of last year, in the latest sign that demand in China is surging to levels that could take it past India as the No. 1 buyer of gold this year.
In other markets, Asian shares fell as concerns over financing available to property developers weighed on Chinese markets.