A spate of soft data from the US and China has raised concerns about the outlook for global growth, drawing investors back to gold, which has risen more than 10 percent this year, after a 28% drop in 2013 that put an end to 12 years of gains.
US gold futures for April delivery stood at $1,335.10 an ounce, down $2.70. They jumped to a four-month high of $1,339.20 in the previous session.
"The drivers for gold have not changed much ...The US data has continued to be on the weak side, the dollar has been a bit under pressure again," ABN Amro analyst Georgette Boele said.
"In fact, the rally will not probably run out of steam for the moment as long as this data and the dollar stay weak but on the other hand we are still convinced that the economic situation will turn around and gold will come under pressure again."
The dollar was down 0.1 percent against a basket of main currencies ahead of data showing U.S. December house price index and consumer confidence for February. Investors will also be looking ahead to Thursday, when U.S. Federal Reserve Chair Janet Yellen speaks to the Senate Banking Committee in her semi-annual testimony about monetary policy.
Yellen's first comments since replacing Ben Bernanke as Fed chief have largely supported the pace of the stimulus tapering, suggesting recent weakness in the economy was merely a blip.
An increase in holdings of bullion-backed exchange-traded funds is also reflecting some renewed interest from investors, analysts said.
In the physical sector, Indian and Indonesian buyers purchased small amounts of gold bars, keeping premiums against the spot London prices steady at $1.20 to $1.50 an ounce in Singapore.