The most active gold contract for August delivery rose 10.2 USA dollars, or 0.84 percent, to settle at 1,227.50 dollars per ounce.
Looking ahead, investors are awaiting a host of US economic indicators, including core inflation, retail sales and industrial production for June later in the session for more insight into how the Fed might proceed. It was poised for a weekly gain of 1.3 per cent, the biggest since mid-May.
He said, however, the main event risk for the currency is tomorrow's domestic inflation data.
August Comex Gold futures came in at $1217.40, down $1.70 or -0.14%. The dollar was steady against a basket of major currencies on Thursday, as investors turned their attention to Friday´s economic data, a day after Yellen signaled the Fed´s rate hikes could be gradual.
For the week, silver is on track for a gain of around 1.5%.
The dollar was little changed against a group of peers early on Friday, as currency investors remained cautious ahead of USA inflation data due later in the session. A stronger US currency weighs on gold, making the dollar - p riced commodity more expensive for non - USA investors.
"We remain neutral on gold at this point as the dollar's short-term trend is inconclusive, allowing higher yields to fill the space and throttle any gold rallies", said INTL FCStone analyst Edward Meir.
Meanwhile, holdings at the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund fell 0.43 percent to 828.84 tonnes on Thursday from 832.39 tonnes on Wednesday.
September silver futures were up 7 cents, or 0.4%, at $15.77 a troy ounce at 7:28 a.m. ET.
"A move above US$16.20 could trigger quite a bit of accelerated buying from the funds", he said. Platinum rose 0.6 percent to $906.70 per ounce.