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Gold retained sharp overnight gains on Wednesday, bolstered along with other safe-haven assets as risk-aversion in the market sent equities tumbling.

The metal has also been helped by speculation that the Federal Reserve may not raise U.S. interest rates this year, after the first rate hike in nearly a decade in December.

"Bullion's ability to hold above $1,200 is impressive. The longer it does so, the stronger a base it will build," said HSBC analyst James Steel. "As long as gold-ETF demand holds up, we believe the gold rally can be sustained."

Technically, gold looks set to test recent highs at $1,240 and then a one-year top of $1,260, MKS Group trader Jason Cerisola said.

“Gold is performing largely as a safe-haven asset given the equity doldrums and overall risk aversion,” OCBC Economist said in response to e-mailed questions, laying out his case for changing his forecasts. “Should risk aversion dominate amid intensified global growth headwinds, gold may well rally to as high as $1,400.”

FXStreet Analyst said, “In the day ahead, the prevalent risk-off/on sentiment in the market will continue to dictate the moves in the bullion. While the US new home sales and services PMI report will be eyed for fresh cues on the US dollar.”

“The metal has an immediate resistance at 1233.30 (daily high) and 1239.20 (Feb 18 High). Meanwhile, the support stands at 1221.28/1220 (10-DMA/ 200-DMA) below which doors could open for 1217/14 (1h 50-SMA/ daily S1).”

Reference: Reuters, FXStreet, Bloomberg