Gold prices recovered slightly after touching a near 10-month low in early trade on Thursday as the dollar index eased, but growing odds of a U.S. interest rate hike capped further gains.
Spot gold was up 0.25 percent at $1,175.36 an ounce by 0711 GMT. The metal hit its lowest since Feb. 5 at $1,163.45 earlier in the session.
U.S. gold futures rose about 0.3 percent to $1,173.80 per ounce.
The dollar index, which measures the greenback against a basket of major currencies, eased 0.26 percent to 101.240.
"Gold has been sensitive to the U.S. monetary policy and dollar movements," said Mark To, head of research at Hong Kong's Wing Fung Financial Group. "Inflation as well as pace of interest rate hike expectations among the investors are increasing along with the opportunity cost of holding gold."
The metal has been under constant pressure from a strong U.S. dollar and climbing Treasury yields since President-elect Donald Trump's policy plan signalled faster inflation.
Strong U.S. data on Wednesday pointed to economic strength which could further cement the case for an interest rate hike from the Federal Reserve this month.
Dallas Fed Bank President Robert Kaplan suggested on Wednesday it was time for an interest-rate raise as the U.S. economy was making good progress toward full employment with inflation heading toward the Fed's 2 percent goal.
Traders see about a nine in 10 chance that policymakers will raise rates when the Fed meets in December.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.13 percent to 883.86 tonnes on Wednesday. [GOL/ETF]
Elsewhere, political uncertainty in Europe persisted ahead of Italy's referendum on Sunday, capping the euro, while European Central Bank (ECB) President Mario Draghi warned of risks to the continent's prosperity.
Euro zone inflation hit a 31-month high in November, providing modest relief for the ECB ahead of an interest-rate decision next week.
"Any rise in geopolitical risks or investor uncertainty in the months ahead may spur demand for perceived 'safe-haven' assets, especially gold, but also silver," said James Steel, chief metals analyst for HSBC Securities.
Silver was 0.4 percent higher at $16.54 an ounce.
Platinum crawled up 0.1 percent to $912 after hitting its lowest since Feb. 8 at $895 earlier in the session.
Palladium was unchanged at $770.08. The metal touched its highest since June 2015 at $774.60 earlier.
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