Gold headed for its sharpest weekly drop in more than two months on Friday as strong US economic data lifted uncertainty over the timing of the Federal Reserve's stimulus slowdown.
Spot gold was up 0.1 percent to $1,242.91 an ounce by 1102 GMT, after hitting a fresh four and a half month low of $1,236.29 in the previous session.
US gold futures for December delivery fell 0.1 percent to $1,242.40 an ounce.
Gold was on track for a 3.5 percent weekly drop, while spot silver also headed for its worst week since mid-September, down nearly 4 percent so far.
"Bullion is now trying to consolidate near new lows after we have broken below the the October deep of $1,260," VTB Capital analyst Andrey Kryuchenkov said.
"For now the market is still driven by macro headlines and is still wary of the fact that the Fed will be the first to reduce monetary stimulus," he added.
A break of the key support area of $1,238-$1,240 an ounce would open up the potential for a broader move towards $1,180, ANZ said.
The dollar fell 0.3 percent against a basket of currencies, mostly due to a stronger euro after European Central Bank President Mario Draghi shot down a report that the ECB was actively considering cutting a key interest rate below zero.
Solid U.S. data over the past few weeks was hurting bullion prices as it could bolster the case for curbing stimulus soon. The Fed's massive bond-buying programme has burnished gold's appeal as a hedge against inflation.
Uncertainty over the timing of the tapering has pushed investors to take money out of gold, causing the metal to drop 25 percent this year.
Janet Yellen - the likely next Fed chair - said last week that she would press forward with the bank's ultra-easy monetary policy until officials were confident a durable economic recovery was in place that could sustain job creation.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 3.6 tonnes to their lowest since early 2009 at 856.71 tonnes on Thursday. Outflows have totalled 450 tonnes this year.
Physical demand picked up slightly due to the price drop but many buyers were still on the sidelines hoping for further declines, dealers said.
Data from the International Monetary Fund on Friday showed that Germany, the world's second biggest holder of gold reserves, cut its bullion holdings in October for the second time in five months.
Silver fell 0.2 percent at $19.89 an