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[BENGALURU] Gold edged up on Monday, extending its recovery from a 10-1/2-month low hit last week, as the US dollar slipped from a 14-year peak against a basket of currencies.
Spot gold edged 0.3 per cent higher to US$1,137.76 an ounce by 0407 GMT. The bullion touched US$1,122.35 on Thursday, its weakest since Feb 2.
Gold now appears to have found a base, however, upside will be limited as investors look to other markets for yield, ANZ said in a note.
The dollar index, which measures the greenback against a basket of currencies, fell 0.2 per cent at 102.720. The US dollar hit a 14-year high of 103.56 following the Federal Reserve's hawkish interest rate forecasts on Wednesday.
Gold is likely to rebound to US$1,160-US$1,180 levels before the year-end, said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
US gold futures gained 0.2 per cent to US$1,139.90 per ounce on Monday.
The Fed hiked rates for the first time in a year last week and projected three more increases in 2017, up from the two projected in September.
Richmond Fed President Jeffrey Lacker said on Friday the Fed will likely need to raise interest rates more than three times next year and faces challenges in gradually cooling off the US economy.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the US dollar, in which it is priced.
"Medium- to long-term view (for gold) is not optimistic," said Wing Fung's Mr To.
"I won't be surprised if gold prices move down to US$1,050 to US$1,080 by the start of next year."
Spot gold may bounce moderately to US$1,153 per ounce as it has found a support at US$1,121, according to Wang Tao, Reuters analyst for commodities technicals.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.63 per cent to 836.99 tonnes on Friday. Holdings are down over 11 per cent since November.
"(The fall in ETF holdings) illustrates the view investors are moving away from gold at least for the medium term," Mr To added.
Hedge funds and money managers cut their net long position in Comex gold contracts for the fifth straight week, taking it to a 10-month low in the week to Dec 13, US Commodity Futures Trading Commission data showed on Friday.
Silver gained 0.2 per cent to US$16.11 per ounce.
Platinum was steady at US$926.20 and palladium was down 0.5 per cent to US$691.90 an ounce.