US gold futures were up 0.1 percent at $1,329.1 per ounce. "The dollar's trajectory and soundings from the Fed will obviously play on gold prices, but the metal's focus is now more on key levels than key events," said Ronan Manly, a precious metals analyst at BullionStar Singapore. "The main target is still the technically important area between $1,350 and $1,360 above which would be a one year high."
The dollar index against a basket of six major currencies was set to decline about 0.3 percent this week, which could be its biggest weekly fall in a month. The US unit has been under pressure on hopes of a US-China trade deal. US and Chinese negotiators resumed high-level talks on Thursday to hash out a deal that could end their trade war, just over a week before a US-imposed deadline.
"On a day to day basis gold is a function of changing currency markets and the US dollar. Medium outlook is a lot more to do with geopolitical issues and yields" said Kyle Rodda, a market analyst with IG Markets. "But the fact that it was overbought-driven very much by a new yield environment, tensions around the world especially around geopolitics, is keeping gold prices elevated."
Indicative of investor sentiment toward bullion, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.63 percent to 789.51 tonnes on Thursday.