Gold extended earlier gains to a session high above $1,330 per ounce on Wednesday, in line with a broadly weaker dollar, after U.S. producer price data suggested a tame inflation outlook that might temper expectations for early Fed stimulus reduction.
U.S. July PPI data came in flat on the month, compared with expectations for a 0.3 percent rise.
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Spot gold rose 0.9 percent to $1,332.80 per ounce by 1442 GMT. It fell 1.1 percent on Tuesday, ending a four-day winning streak after strong U.S. economic data and further import curbs by key buyer India.
A pullback in the Fed's $85 billion monthly bond purchases would support a higher interest rate environment, further diminishing gold's attractiveness.
The next U.S. Federal Reserve meeting is scheduled for Sept. 17-18. Until then, markets will scrutinise economic data to gauge the strength of economic recovery. St. Louis Fed President James Bullard speaks on the U.S. economy and monetary policy at 1915 GMT.
"We've had several speeches earlier in the month, and gold prices have reacted initially to the speeches then - but the surprise factor isn't as apparent anymore," said Howard Wen, HSBC analyst.
Uncertainty over on the timing of any Fed tapering has been a major factor in pushing the metal down 21 percent this year, after 12 consecutive years of gains.
Traders said gold prices were likely to rise in India this week, extending gains past their four-month high, due to the latest import duty hike that was introduced on Tuesday.
The Indian government has raised import duties on gold three times this year in an attempt to strengthen the rupee and reduce the country's trade deficit.
"On balance, we expect Indian imports of gold to fall this year as the decrease in official flows is not entirely offset by strong growth in imports of gold through other channels," said David Jollie, analyst at Mitsui Precious Metals.
"However, we do not believe that Indians' desire to own gold has been weakened by these changes. Overall, we see these developments as bearish for gold in the short term but only mildly bearish in the medium term."
In other metals, silver rose 1.2 percent to $21.64 an ounce, having touched a two-month high of $21.76 on Tuesday, on track for its sixth straight session of gains for the first time since January.
Platinum fell 0.2 percent to $1,493.25 an ounce. Palladium fell 0.7 percent to $735.72 an ounce.