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Gold retreated on Thursday after rising the most since late April the session before as the dollar recovered some lost ground.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.11% at 93.90.
But expectations that the U.S. Federal Reserve is unlikely to raise interest rates at its next meeting in June should help gold find strong support at $1,250 an ounce, said OCBC Bank analyst Barnabas Gan.
"The reason for the recent glitter in gold is the downplay of the probability of a Fed rate hike in June. It should give gold a lift for the rest of the quarter," said Gan.
Investors will be eyeing the weekly U.S. jobless claims tonight for trading cues later in the global session, with MKS Group trader Jason Cerisola seeing support for gold at $1,260 and resistance at $1,280.
Surging inflows into gold-backed exchange-traded funds drove global gold demand to its highest first-quarter total on record this year, despite a near 20 percent drop in jewellery buying, the World Gold Council said on Thursday.
Demand hit 1,290 tonnes in the period, the WGC said in its latest Gold Demand Trends report, the best first quarter and second strongest quarter overall since its data series began.
Investment in products like ETFs, coins and bars more than doubled to 618 tonnes, accounting for 28 percent of the total. That helped fuel a 16 percent surge in gold prices in the period, its biggest quarterly rise in nearly 30 years.
"Two major themes emerged in the first quarter of 2016. Spurred on by the uncertainty raised by negative interest rates, the investment sector was the dominant driver of gold demand," the WGC's head of market intelligence Alistair Hewitt said.
"Conversely, jewellery demand endured a difficult quarter due to a continued lack of consumer confidence in the face of a weakening Chinese economy and a 42-day strike by jewellers in India."
Reference: Reuters, World Gold Council, Investing
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