Gold rose on Thursday as the dollar weakened after a 10-day winning streak and investors took the opportunity to buy bullion as a hedge against political uncertainty in the United States and Europe. Spot gold rose 0.7 percent to $1,241.18 an ounce by 1557 GMT and is up about 10 percent from a mid-December low.
US gold futures gained 0.7 percent to $1,242.10. Concern over US President Donald Trump's policies, as well as elections in the Netherlands, France and Germany this year, have fuelled gold's rise to a peak of $1,244.67 on February 8.
But the prospect of a higher dollar and US Treasury yields after Fed Chair Janet Yellen said that US interest rates may need to be raised in March pushed gold to $1,216.41 on Wednesday, its lowest since February 3. A stronger dollar makes gold more expensive for holders of other currencies, while higher yields increase the opportunity cost of holding non-yielding bullion. Higher interest rates would lift yields further.
"It's a tug of war between a higher probability of a US rate hike in March and upcoming elections around Europe, which are creating uncertainty and demand for safe assets," said Jens Pedersen at Danske Bank.
Signs of faster economic growth and inflation in the United States and Europe are also driving demand for gold as an inflation hedge, Pedersen said. US residential construction and employment data on Thursday showed that the economy continued to rebound.
Adding support to gold prices, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, increased its bullion holdings for an 11th consecutive day on Wednesday.
In other precious metals, palladium was up 0.3 percent, at $791.72 an ounce. Earlier in the session it touched $794.90, its highest since January 24 and just shy of a 21-month high.
The metal used in emission-controlling catalytic converters for the automotive industry has risen 17 percent this year.
But car sales in the United States and China in the first quarter are likely to disappoint investors and cause a correction that could drive prices below $700, said Julius Baer analyst Carsten Menke.
Silver was up 0.3 percent at $18.04 an ounce. Platinum was 0.6 percent higher at $1,016.