Gold was on track for a 7.8 percent quarterly rise on Friday, its best quarter in a year, as uncertainty over U.S. President Donald Trump's tax and investment plans and a series of elections in Europe fueled demand for bullion as a safe haven.
Spot gold was down 0.1 percent at $1,241.32 an ounce at 1213 GMT. U.S. gold futures were down 0.4 percent at $1,240.60 an ounce. Though well ahead on a quarterly basis, gold fell 0.7 percent on Thursday, its biggest one-day drop in more than three weeks, after a failure to break resistance at its 200-day moving average triggered technical selling.It was on track to end the week down 0.2 percent.
"In the short term, factors including a strengthening dollar could pull prices down to around $1,230 an ounce," said Yuichi Ikemizu, head of commodity trading at Standard Bank in Tokyo.
The dollar was on course for its best week in nearly two months, helped by better-than-expected U.S. economic growth data and comments by the New York Federal Reserve president that reinforced expectations of U.S. interest rate hikes this year.
A stronger dollar makes bullion more expensive for holders of other currencies, while higher interest rates lead to higher bond yields and dampen demand for non-yielding gold.
But gold is underpinned in the coming months by doubts over Trump's ability to enact tax cuts and investment spending and an uncertain political outlook in Europe. The buying of gold as a haven from risk, plus a recovery in Indian buying, are likely to push prices to an average $1,259 an ounce this year, GFMS analysts at Thomson Reuters said in their Gold Survey 2017, published on Friday.
A failure by Trump to make progress on his stimulus plans would reduce the chances of a rise in U.S. interest rates in June, Tom Kendall at ICBC Standard Bank said in a note.
"That in turn would likely give gold the impetus to break up through $1,300 again," he said.
In other precious metals, spot silver was up 0.2 percent at $18.11 an ounce, having touched $18.29, its highest in four weeks, in the previous session. Silver has risen 13.7 percent this quarter.
Platinum was down 0.1 percent at $942 an ounce and is up 4.8 percent this year. Palladium was up 0.3 percent at $795.97 an ounce. The metal used in catalytic converters that curb pollution from vehicle exhausts has risen over 17.3 percent this quarter.
(Additional reporting by Arpan Varghese in Bengaluru; Editing by Toby Davis/Keith Weir)