Gold edged above $1,590 an ounce on Friday, helped by a rebound in the euro and waning appetite for assets seen as higher risk, such as stocks, ahead of key U.S. inflation data later in the day.
Prices were headed for a second straight week of gains as investors still count continued quantitative easing measures in key economies and lurking risks in the euro zone among reasons to own bullion.
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Spot gold inched up 0.2 percent to $1,592.60 an ounce by 1035 GMT, on course for a weekly gain of nearly one percent.
U.S. gold futures for April delivery were little changes at $1,591.70.
"I think there is a feeling that the risk appetite is gone too far and I wouldn't be surprised to see equities pulling back and gold coming back into favour a bit in coming days," Standard Chartered analyst Dan Smith said.
"Obviously, the euro strength is helping gold prices to hold above $1,590 and it seems to me that there is more upside risk than downside risk for the time being."
A series of positive economic data out of the United States sent equity markets to multi-year highs and boosted the dollar in recent weeks, tarnishing gold's safe-haven appeal.
But European shares fell and the dollar retreated against the euro and a basket of other key currencies on Friday as uncertainty crept in over whether recent strong U.S. data will be enough to prompt an early retreat from monetary easing by the Federal Reserve.
Analysts also said the prospect of EU leaders looking at short-term ways of boosting faltering euro zone economies may lift the euro against the dollar.
A weaker dollar makes commodities like gold cheaper for holders of other currencies.
The market will monitor U.S. consumer inflation data at 1330 GMT, which is likely to provide some direction, analysts said.
"The risk of stronger numbers today would once again test gold's resilience," UBS analyst Joni Teves said in a note.
"The yellow metal's ability to hold its ground amid better U.S. data today would offer further encouragement to nervous investors."
The next major event is a policy meeting of the Federal Reserve on March 19-20 to gauge the central bank's attitude towards monetary stimulus.
An exit from the stimulus policy would deal a heavy blow to gold, which has thrived on demand from investors who buy gold to hedge against the inflationary risks of loose monetary policies.
As a gauge of investor interest, holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, were unchanged at 1,236.307 tonnes from a day earlier on March 14. But they have dropped 3.432 tonnes so far this week - on course for an eleventh week of decline.
Signs of investor fatigue and higher downside risks to the gold outlook led Barclays' analysts to cut its 2013 price forecast by 7.4 percent to $1,646 an ounce. It however said that thers is scope for gold to gain traction, given the debt ceiling debate in the United States, scheduled for May.
"Prices are likely to encounter range-bound trading, with support coming from physical demand and a low interest rate environment, but struggle to gain momentum without a new catalyst, given the risk of medium-term inflation," it said.
Spot silver rose 0.5 percent to $28.93 an ounce.
Platinum was up 0.4 percent at $1,592.73. The metal has returned to trade at parity with gold again this week on worries over auto demand growth in Europe, which mostly uses platinum loadings in auto catalysts to clean up exhaust emissions. Palladium rose 0.6 percent to $771.74.
(Editing by William Hardy)