Spot gold rose to its highest since Nov. 8 at $1,312.40 earlier in the session, and was up 0.8 percent to $1,311.90 an ounce by 1112 GMT. It is up around four percent for the week - the largest such gain since mid-August.
U.S. gold futures for April delivery also hit three-month peaks of $1,312.70, climbing for an eighth straight session - the longest winning streak since July 2011.
The technical picture has improved over the past few sessions, but the spot gold's 14-day relative strength index (RSI) is now at 71, with a reading above 70 considered to represent overbought territory.
"Gold has gone through a couple of important levels at $1,270 and $1,300 and if it manages to close around $1,310 we might look for some further gains to be made, although it could drop back, as it is looking a bit toppy on the RSI," Mitsubishi analyst Jonathan Butler said.
"The dollar has been suffering, giving some strength to gold in the past two weeks ... there is some support and sentiment has changed somewhat for the short term."
The dollar fell 0.2 percent versus a basket of currencies, having hit its lowest level since Jan. 2 earlier.
Gold has gained nearly nine percent since the beginning of the year, after a 28 percent drop in 2013, on doubts over the U.S. economic recovery and as emerging-market turmoil weighed on some equity markets.
The latest boost for prices came from data on Thursday that showed U.S. retail sales fell unexpectedly in January and more Americans filed for jobless benefits last week, the latest signs the economy started the year on a softer footing as unseasonably cold weather took its toll.
Analysts remain however cautious over the medium-term outlook for gold, as they expect the U.S. economy to recover and the dollar to rally, making the investment case for gold, usually seen as a safe haven in times of trouble, still unattractive.
"As positive as we remain on the American currency and the U.S. economy in 2014 (especially once macro estimates rebound as the weather effect passes), there is little point fighting the short-term uptrend," VTB Capital said in a note.
"However, cautious technical buying as well as fresh ETF inflows could still see temporary gains to $1,320."
Investor sentiment seems to have improved with SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, posting its biggest inflow since late December, up 7.5 tonnes to 806.35 tonnes on Thursday.
Physical demand, meanwhile, could tail off as price gains and the possibility of another drop keeps buyers at bay.
"The whole physical demand is looking softer because prices are higher and the seasonal heavy buying time is over now and I think the support coming from that source is not guaranteed going forward," Butler said.
Silver climbed to its highest since November at $20.89 an ounce earlier and was poised to post its second straight weekly gain. Prices were up 1.9 percent at $20.83 an ounce.
Platinum was trading up 0.6 percent at $1,420.49 an ounce, while palladium gained 0.3 percent to $730.75 an ounce.