The US currency rose across the board on Wednesday after Democrats in the House of Representatives launched an impeachment inquiry against US President Donald Trump, prompting investors to seek refuge in the dollar.
That sparked a 1.8% slide in gold prices, their biggest one-day percentage drop in three weeks.
Spot gold showed signs of recovery on Thursday, rising 0.3% at $1,507.86 per ounce by 0806 GMT. US gold futures were up 0.2% at $1,514.80 per ounce.
"Yesterday's 2% fall is a very good opportunity to buy gold," said Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade.
"Given the uncertainties surrounding geopolitical headlines such as the US-China trade spat and Trump's impeachment inquiry, the market is not leaving any opportunity to buy gold if they see any correction."
IG Markets analyst Kyle Rodda said evidence that the global economy is slowing and policymakers will potentially partake in new quantitative easing programmes suggested rates and yields were likely to fall, potentially benefitting non-yielding gold. "Gold's price from a fundamental perspective is still supported," he said.
Indicative of investor sentiment, holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, rose 1.8% to 924.94 tonnes on Wednesday, their highest since November 2016.
Spot gold is likely to fall to $1,488 per ounce, as it has broken support at $1,514, according to Reuters technical analyst Wang Tao.