Gold edged higher on Thursday after tumbling 12 per cent over the past 8 sessions, as soft data on US economic growth eased fears of a quick end to the Federal Reserve's monetary stimulus.

Bullion was still not far off Wednesday's near three-year low, with its safe-haven appeal severely dented since Fed Chairman Ben Bernanke laid out a strategy last week to wind down the central bank's $85 billion monthly bond purchases over the next few months.

"Investor sentiment is still quite sour right now," said a trader in Hong Kong.

"There is a lot of speculative fervour around gold. For investors to come back in droves, we will need to see some consolidation in prices and a return to an upper trending market," the trader said.

Spot gold rose 1 per cent to $1,238.21 an ounce by 0312 GMT, after a 4 percent fall on Wednesday that took the metal to $1,221.80, its lowest since August 2010. Silver, which sank 5.5 per cent in the previous session, gained about 2 per cent.

Comex gold rose about $8 to $1238.10, also near 3-year lows.

Prices were boosted by data on Wednesday that showed US gross domestic product expanded at a 1.8 per cent annual rate in the first quarter, compared with the previously reported 2.4 per cent pace, lending a cautionary note on economic recovery.
 
Gold and other commodities have benefitted significantly from cheap central bank money over the years. Any pause in US economic recovery momentum would mean a delay in the Fed's rollback of monetary easing and a positive for bullion.  

Investors have pulled back from precious metals this year due to gains in stock markets and the US dollar. Gold is down more than 26 per cent for the year and is headed for its worst quarterly performance since at least 1968.

ABN Amro was the latest to pare its gold price forecasts, lowering its 2013 year-end gold forecast to $1,100 an ounce from $1,300 and 2014 year-end price to $900 from $1,000, citing liquidation in funds.

SPDR Gold Trust, the world's largest exchange-traded gold fund, posted its second-biggest percentage drop in holdings this year on Tuesday to its lowest levels in more than four years.

"There is no reason for investors to hold precious metals as the outlook for capital gains are dim and they pay no income," ABN Amro analyst Georgette Boele said in a note.

Physical demand has also not picked up in top consumers India and China as much as it did in mid-April when prices fell the most in 30 years.

India is reeling under the impact of new import curbs, while Chinese markets are being rocked by fears over a credit crunch.
 
Shanghai gold futures fell for the eighth straight day. - Reuters