Although the fundamentals are liable to put some downward pressure on gold, there will be a reluctance to sell given concerns over a renewed spike in North Korea fears.
Gold prices traded in narrow ranges late in US trading on Wednesday with support on approach to the $1,320 area despite a generally firm dollar.
This pattern persisted in early Europe on Thursday with caution ahead of the US inflation data while the weaker than expected Chinese industrial production data had some positive impact on precious metals.
The US CPI data was slightly stronger than expected with a headline increase of 0.4% for August, the strongest monthly increase since February with the annual rate increasing to 1.9%. The core increase was in line with consensus expectations at 0.2%.
Jobless claims declined to 284,000 in the latest week from 298,000 as hurricane influences continued to distort the data.
The dollar strengthened in immediate reaction to the data which triggered fresh selling pressure on gold, although it failed to sustain its best levels.
US yields were unable to make significant headway with 10-year yields unable to hold above 2.20% which also provided net protection to gold prices.
There was a fresh flurry of speculation surrounding preparations for another North Korean missile test which triggered a dip in the dollar and also pushed gold prices higher.
The dollar overall was still able to make net gains on the day, although gold was resilient at lower levels with support below $1,320 per ounce and consolidation near $1,325 late in the European session.
Position adjustment will have a significant impact on Friday and there is likely to be some reluctance to hold positions into the weekend given the risk of renewed tensions surrounding North Korea.
Gold Prices 4-Hour Chart