Gold edged up on Tuesday as bargain hunters moved in after prices touched their lowest in 10 months in the previous session, although the chance of a rate hike as early as next week kept a lid on gains.
Spot gold was up 0.3 percent at $1,173.66 an ounce by 0300 GMT. The yellow metal touched $1,157 an ounce on Monday, its lowest since Feb. 5.
U.S. gold futures, which also touched a 10-month low in the prior session, shed 0.1 percent to $1,175.30 per ounce.
“With a Fed rate hike approaching, the whole market is just waiting for that,” said Jiang Shu, chief analyst at Shandong Gold Group.
Shu said gold was seeing some support from buying by Chinese jewelry makers ahead of an early Spring festival next year.
U.S. services sector activity hit a one-year high in November, with a surge in production boosting hiring, further evidence of strength in the economy that clears the way for the Federal Reserve to raise interest rates next week.
Interest rates futures implied traders saw a 93 percent chance the Fed would raise rates by a quarter point to 0.50-0.75 percent next week, CME Group’s FedWatch showed.
Fed officials cautioned on Monday that the incoming Trump administration’s economic plans should not be cast as if the economy is in crisis, but instead be designed to help the economy’s long-run prospects.
Fed officials worry there is risk that overly aggressive fiscal, tax and other changes could become inflationary given the economy’s current strength. That could force the Fed into more rapid interest rate increases and possibly raise the risk of recession.
“Gold will likely remain under pressure going into year-end,” said Edward Meir, an analyst with INTL FCStone in a note.
He pointed to the combined impact of higher rates, a stronger dollar and buoyant U.S. equity markets, coupled with significant ETF outflows and weaker Indian physical demand.
Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund fell 0.04 percent to 869.90 tonnes on Monday.
Among other precious metals, silver was up 0.8 percent at $16.85 per ounce and platinum rose 0.4 percent to $937.40 an ounce.
Palladium added half a percent to $746.97 an ounce.