Gold rose 1 percent on Friday, rallying for a second consecutive day with a boost from renewed fund buying and equities' weakness after bullion posted its worst annual decline in 2013 in more than 30 years.
Brisk coin buying, strong Chinese physical demand and new positions initiated by funds related to new-year index rebalancing also helped lift gold to a weekly gain of more than 2 percent, its largely rise in 10 weeks.
Analysts said gold appeared to find support from equities' losses this week after bullion's tumble and the stock market's strong run last year.
"Positive bullion prices in reaction to the decline in equities may set the tone for 2014 and reinforce the negative correlation between the two," said James Steel, chief precious metals analyst at HSBC.
Spot gold was up 1.1 percent to $1,237.40 an ounce by 2:01 p.m. EST (1901 GMT).
Traders also cited short covering for the metal's strength as bullion has rallied more than 4 percent after hitting a six-month low at under $1,200 an ounce on Tuesday.
U.S. Comex gold futures for February delivery settled up $13.40 at $1,238.60 an ounce, with trading volume about 20 percent below its 30-day average, preliminary Reuters data showed.
Gold's gains came after it lost nearly 30 percent in 2013, ending a 12-year bull run, largely due to the U.S. Federal Reserve's plan to unwind its monetary stimulus.
Bullion's second day of sharp gains came as U.S. stocks eased on Friday, extending a broad decline in the new year with major indexes on track to end the week lower.
Premiums on the Shanghai Gold Exchange showed that Chinese buying has picked up in recent days as global prices hovered around $1,200 near the end of 2013, dealers said.
Also boosting gold market sentiment were brisk sales of the U.S. Mint's new 2014-dated American Eagle gold coins on the first business day of the year, extending last year's strength boosted by gold prices' broad decline.
Some analysts, however, cautioned that the upward momentum in the early days of the new year may only last a few weeks due to some index rebalancing activity.
A stronger U.S. dollar and heavy losses in crude oil prices this week could pressure the precious metal as more participants return next week following the recent holidays, said Edward Meir, metals analyst at brokerage INTL FCStone.
Among other precious metals, silver rose 0.4 percent to $20.08 an ounce. Platinum gained 0.4 percent to $1,406.74, and palladium eased 0.1 percent to $725.72 an ounce.
Platinum group metals now digest news that the top four automakers in the U.S. market missed December sales expectations. However, 2013 will still easily be the best year for the industry since before the recession.