Gold firmed on Thursday, lifted by a slight retreat in the dollar, but renewed bets that the U.S. Federal Reserve may start early tapering of economic support capped gains, with the European Central Bank also slowing its bond buying.
Spot gold rose 0.5pc to $1,797.41 per ounce by 1:34 p.m. EDT (1734 GMT). U.S. gold futures settled up 0.4pc, at $1,800 per ounce.
Making gold cheaper for holders of other currencies, the dollar edged down, while the euro extended modest gains after the ECB said it would slow the pace of bond buying under its emergency scheme.
U.S. weekly jobless claims data came in at near 18-month lows, "which cements the belief that a December (Fed) taper announcement was possible. ... So, gold prices are going to consolidate around these levels," said Ed Moya, senior market analyst at foreign exchange brokerage OANDA.
The increased likelihood that the ECB may start reducing stimulus at some point next year drove gold's initial decline back below $1,800 per ounce, Moya added.
Initial claims for state unemployment benefits in the U.S. dropped 35,000 to a seasonally adjusted 310,000 for the week ended Sept. 4, the lowest level since mid-March 2020.
Gold tends to gain when interest rates are low, while some investors also view bullion as a hedge against higher inflation that could follow stimulus measures.
StoneX analyst Rhona O'Connell said that "overall uncertainty is keeping gold supported, while the longer-term element underpinning prices is the prevalence of negative real rates."
"The Delta (coronavirus) variant is obviously still muddying the waters," O'Connell added.
Elsewhere, silver rose 0.6pc to $24.09 per ounce, platinum dipped 0.1pc to $978.93 per ounce, having earlier touched a near three-week low.
Palladium dropped 3.2pc to $2,180.27 per ounce, after falling as much as 4.8pc to $2,143.69, its lowest in more than a year.