Gold prices rose above $1,340 on Wednesday, holding onto four-month highs on uncertainty over China's economic policy moves and with weaker data raising questions about the strength of the US recovery.
Investors have poured back into the metal, which has risen 11% since the beginning of the year, on worries about economic conditions in the United States and in China, which is now dealing with unprecedented growth in corporate debt.
Spot gold touched its highest since October 30 at $1,345.35 an ounce and was down 0.1% at $1,339.23 by 1146 GMT.
US gold futures for April delivery fell 0.2% to $1,339.40 an ounce, having earlier hit a four-month high of $1,345.60.
"At the moment the market is reacting to weaker data from China and the US on the assumption that if economic slowdown is confirmed then there may be some scaling back of Fed tapering," Saxo Bank senior manager Ole Hansen said.
"But it is not really a runaway, we are just grinding higher and you could argue that the latest entrants to the market are looking for additional gains and if they don't get that they might be quick to pull the trigger again to get out," he said. "It looks like most people are not seeing the upside going much above $1,350/1,400."
U.S. data on Tuesday showed that home price gains slowed in December, underscoring a loss of momentum in the housing recovery, while February consumer confidence fell short of expectations.
European equities fell on Wednesday, tracking Asia.
Wider markets are cautious ahead of Thursday's testimony from Federal Reserve Chair Janet Yellen, in which she is bound to face questions on the recent spate of soft U.S. economic news and what it might mean for policy.
Funds holdings up
An increase in holdings of bullion-backed exchange-traded funds (ETFs) highlights renewed investor interest in gold, but physical buyers in key consumers such as India and China could be waiting for a price correction.
SPDR Gold Trust, the world's largest gold-backed ETF, said its holdings rose 0.26% to 803.70 tonnes on Tuesday from 801.61 tonnes on Monday.
Hong Kong's net gold exports to China fell 5.4 percent to 89.745 tonnes in January from 94.847 tonnes in December, reflecting a slowdown in demand from record levels in 2013.
"China isn't buying much, which is partly because of the weakening premiums," said a physical gold dealer in Hong Kong, referring to the price difference between 99.99% purity gold on the Shanghai Gold Exchange and cash gold.
High Shanghai premiums over spot gold usually encourage importers to bring bullion into China, which overtook India as the world's biggest gold consumer in 2013.
Silver, which hit its highest since October 31 at $22.16 an ounce on Monday, rose 0.3% to $21.86 an ounce. Platinum rose 0.3% to $1,434.25 an ounce and palladium was down 0.2% at $731.00 an ounce.