Gold steadied around $1,330 an ounce on Friday and was on track for its biggest monthly gain in seven as persistent concerns about a slowdown in the U.S. economy hurt the dollar.
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Gold has gained nearly 7 percent in February, its biggest monthly rise since July, mostly due to weak data in China and the United States and political and economic turmoil in Ukraine, which lifted demand for the metal as an insurance against risk.
"The weather-related weakness in the U.S. data raises uncertainty, as we still don't know how much is down to the weather, how much is down to the economy ...and of course the turmoil in some countries around the world may be contributing to a real overall economic slowdown," Macquarie analyst Matthew Turner said.
Spot gold was unchanged at $1,330.50 an ounce by 1112 GMT, below a four-month high of $1,345.35 struck on Wednesday.
U.S. gold futures for April delivery were down $1.10 to $1,330.70 an ounce.
In her testimony to the U.S. Senate Banking Committee, Federal Reserve Chair Janet Yellen aknowledged unusually harsh winter weather appears to be behind recent signs of weakness in the U.S. economy, suggesting the central bank was poised to press forward in ratcheting back its stimulus.
The Fed trimmed its monthly bond purchases by $10 billion at each of its previous two meetings. Its next meeting is scheduled for March 19.
"The next Fed meeting is really the key because by then some of the economic data should have unambiguously not been weather affected and if that still shows a slowdown the Fed might have to change their policy again, which doesn't necessarily mean an end of tapering but may mean some other loosening," Turner said.
European shares dipped and the dollar fell 0.6 percent versus a basket of main currencies, mostly due to euro strength after euro zone inflation data came in above expectations, easing pressure on the European Central Bank to loosen monetary policy next week.
The physical market was quiet in Singapore, a centre for bullion trading in Southeast Asia.
"The $1,300 to $1,350 trading range is small yet tough. There's a lack of direction, which could push gold prices either way, downward or upward," said a physical dealer in Singapore.
Premiums for gold bars in Hong Kong dipped to $1 an ounce to the spot London prices from as high as $1.70 last week, which reflected a slowdown in demand from China.
Weakening differentials between 99.99 percent purity gold on the Shanghai Gold Exchange and cash gold discouraged imports. On Friday, the Shanghai market was trading at discounts to almost on par with cash gold.
Silver rose 0.2 percent to $21.32 an ounce. Platinum was up 0.1 percent to $1,447.99 an ounce and palladium gained 0.2 percent at $739.60 an ounce.
The platinum group metals had risen about 1.5 percent after the second biggest platinum miner Impala Platinum decided to declare force majeure on supply contracts, which allows certain terms of an otherwise legally binding agreement to be ignored.