Fed officials in the U.S. earlier dismissed talk of keeping policy ultra-loose for an extended period of time.
Monetary stimulus tools, such as low interest rates, dovish language and the Fed's monthly USD85 billion asset-purchasing program weaken the dollar to spur recovery, normally a recipe for rising gold prices, though investors avoided the precious metals.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery were down 0.03% at USD1,386.45 a troy ounce in Asian trading on Friday, up from a session low of USD1,382.95 and down from a high of USD1,387.95 a troy ounce.
Gold futures were likely to test support USD1,323.00 a troy ounce, the low from April 16, and resistance at USD1,444.15, Tuesday's high.
The Federal Reserve Bank of Philadelphia reported earlier that its manufacturing index fell to -5.2 in May from 1.3 in April.
Analysts were expecting the index to improve to a reading of 2.4 in May, which fueled sentiments that loose policies at the Federal Reserve aren't going to wind down anytime soon as did disappointing numbers out of the labor market.
The Department of Labor said earlier Thursday that the number of individuals filing for initial unemployment assistance in the U.S. rose by 32,000 to 360,000 last week, well above expectations for an increase of 2,000 to 330,000.
Soft inflation data took the steam out of the dollar as well.
The country's consumer price index fell 0.4% in April from March, worse than expectations for a 0.2% decline, down for the second consecutive month.
Year-on-year inflation rates in the U.S. came to 1.1%, just shy of market expectations for a 1.3% reading and well below the Federal Reserve's 2% target.
Spotty data out of the housing industry dampened the dollar as well.
The Commerce Department said the number of building permits issued in the U.S. rose 14.3% to 1.017 million units in April, well above expectations for a 6.2% increase to 945,000 units.
U.S. housing starts fell by 16.5% last month to 853,000 units, outpacing expectations for a decline of 4.9% to 973,000.
Thursday's data came in wake of soft industrial output and producer-price reports released on Wednesday.
Talk of the Federal Reserve keeping monetary policies loose often sends gold gaining, as stimulus tools tend to weaken the dollar, which historically trades inversely with gold.
Investors avoided the precious metal, however, on sentiments that gold's retreat from a bull market spanning for over a decade still has more room to run.
Elsewhere, Federal Reserve Bank of San Francisco President John Williams suggested earlier that despite spotty economic indicators, monetary authorities may begin to scale back the program later this year.
Philadelphia Fed President Charles Plosser, a known inflation hawk, added separately that the Fed should consider scaling back the program next month.
Elsewhere on the Comex, silver for July delivery was down 0.13% at USD22.630 a troy ounce, while copper for July delivery was up 0.05% and trading at USD3.288 a pound.