Gold rose on Thursday, extending the previous day's recovery from four-week lows as investors took advantage of lower prices to buy, though expectations that U.S. monetary policy is set to tighten limited gains. A tough new round of U.S. sanctions on Russia, which weighed on stocks with exposure to the country, helped send palladium to 13-1/2-year highs. The metal is chiefly sourced from Russia. Spot gold was up 0.3 percent at $1,303 an ounce, while U.S. gold futures for August delivery were up $5 an ounce at $1,305. Read MoreBarrick Gold CEO Jamie Sokalsky to step down Spot prices fell more than 3 percent over the first two days of this week to their lowest since mid-June, at $1,291.70. Heraeus trader Alexander Zumpfe attributed the rise in prices since then to bargain hunting. "Overall physical demand is rather low and the actual environment has not changed significantly," he said. "Interest rates in the U.S. are still expected to rise in the foreseeable future, inflation is not in sight, southern European banking jitters are calming down and geopolitical tensions are not looking as if they would spread."

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