Gold edged up on Thursday as the US dollar weakened, although the prospect of a US rate increase in June kept prices just above eight-week lows hit earlier this week. Spot gold was up 0.2 percent at $1,220.86 per ounce by 0738 GMT. Gold hit an eight-week low of $1,213.81 on Tuesday. US gold futures also gained 0.2 percent, to $1,221.10 an ounce.

"Combined with a moderation in confrontational foreign policy rhetoric from the Trump administration in May, a 'market friendly' election result in France is helping to unwind demand for gold to hedge against political risk," BMI Research said in a note. "Receding risk aversion in Europe and hawkish language from the US Federal Reserve will cap gold demand in the near term," BMI added, cutting its 2017 average gold price forecast to $1,250 per ounce from $1,300. Spot gold is expected to test support at $1,209 per ounce, a break below which could cause a further loss to the next support at $1,188, according to Reuters technical analyst Wang Tao.

Copyright Reuters, 2017