Gold edged lower on Wednesday as the dollar climbed to levels not seen in four years and global shares rebounded, while investors remained cautious ahead of US economic data due later in the week. Spot gold, stronger initially, fell to a session low of $1,216.55 an ounce before trading down 0.2 percent at $1,220.25 an ounce by 1451 GMT. It had rebounded from an 8-1/2-month low of $1,208.36 in the previous session.
US gold futures were down $0.70 at $1,221.30 an ounce. "A stronger dollar is a fairly consensus view as well as higher US Treasury yields ... the Fed rhetoric lately has been helping as well, and for precious metals it means that the outlook remains poor," Credit Suisse analyst Karim Cherif said.
"However, we were looking at support at $1,200/$1,180 and so far gold managed to hold above that ... there is not going to be a massive drop ahead, and we can even say that prices are already factoring an initial Fed rate tightening." Strong US economic readings have bolstered forecasts of sturdy economic growth this quarter and fuelled speculation of an earlier-than-expected rate increase in the United States that would discourage investment in non-interest-bearing assets such as bullion.
The market is likely to monitor US durable goods and GDP data to be released on Thursday and Friday respectively. Meanwhile, US-led strikes against militants in Syria on Tuesday failed to spur demand for gold. The metal is traditionally seen as a safer bet during times of political uncertainty, but the support gained from international tensions in Ukraine and the Middle East so far this year has often been short-lived.
Investor interest in gold remained weak. SPDR Gold Trust , the world's top gold-backed exchange-traded fund, said its holdings fell 1.2 tonnes to 773.45 tonnes on Tuesday - the lowest since December 2008. Sluggish physical demand in Asia could weaken support for any price rally and would fail to provide a floor if prices were to decline. The fourth quarter is usually a strong period for demand in Asia as consumers in China and India buy for festivals and weddings. But expectations of a further price drop could keep some away.
Silver fell 0.2 percent to $17.69 an ounce after slipping to a four-year low of $17.30 on Monday. Platinum was down 0.4 percent at $1,319.75 an ounce, and palladium gained 0.7 percent to $816.97 an ounce. Palladium trimmed some of its earlier gains after Russia's Norilsk Nickel, the world's largest nickel and palladium producer, said it was in talks to buy palladium worth up to $2 billion from the country's central bank. The market took the news as a sign that state-owned Russian stockpiles are not as depleted as had been thought.