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. "The market is waiting for (US) non-farm payrolls data due this Friday. If we have lower-than-expected data, it is a good chance for gold to have a strong rebound," Shu said. But looking further ahead, Shu expects US interest rate hikes this year to pressure gold.
"Any rise in the first quarter will be a medium-term technical rebound and not a fundamentally driven long trend rally," Shu said. On Tuesday, the US dollar held on to broad gains, resuming its ascent after last week's brief wobble as the prospect of rising US interest rates this year kept sentiment bullish.
"Gold could reach $1,170 at the most until the non-farm payroll data this week," a Singapore-based technical trader said. The most active COMEX gold futures contract finished 2016 up 7.1 percent as compared to the end of 2015. The dollar index - which measures the greenback against six major rivals - climbed over half a percent. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.14 percent to 822.17 tonnes on Friday from Thursday.