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Gold drifted away from two-week lows on Wednesday as the dollar surrendered some gains, but analysts said bullion is unlikely to rise sharply ahead with losses in the greenback seen limited.

Appetite for gold appeared to have eased after the metal failed to convincingly breach the $1,300 resistance level last week. But it was up 20 percent for the year as expectations for a near-term increase in U.S. interest rates have faded.

Spot gold was up 0.6 percent at $1,273 an ounce by 0656 GMT, after touching a low of $1,257.25 on Tuesday, its weakest since April 28.

The dollar slipped versus a basket of major currencies, making dollar-priced assets such as gold cheaper for holders of other currencies. Softer Asian equities also helped gold.

Mark To, head of research at Wing Fung Financial Group in Hong Kong, said that $1,300-$1,400 would be a reasonable price range for bullion for the rest of the quarter.

Gold is supported largely by expectations that the next U.S. interest rate increase will only happen later in the year as Fed policymakers take note of challenging global economic conditions, he said.

"The current situation is favourable to gold but it is not overwhelmingly favourable," said To, adding that the U.S. economy appears to be in good shape overall. "That's why people take some profits along the way."

Goldman Sachs Group Inc. raised its forecasts for bullion prices as it scaled back expectations of U.S. Federal Reserve rate hikes over the next year, while remaining bearish on the metal’s prospects.

The bank raised its three, six and 12-month forecasts to $1,200, $1,180, and $1,150 an ounce respectively, from $1,100, $1,050and $1,000, analysts including Jeffrey Currie and Max Layton wrote in a report dated May 10. Gold currently trades around$1,270. The revision was made after Goldman’s economists cut their prediction for U.S. interest rate increases over the next 12months to 50 basis points from 100 basis points.