Gold ticked higher on Wednesday, with gains capped by a firmer dollar and weaker oil, although the metal remained on track to close the year lower for a third time in a row.
The precious metal has lost nearly 10 per cent of its value this year, largely on fears that higher US interest rates would hurt demand for non-interest-paying bullion.
Spot gold edged up 0.2 per cent to $1,070.40 an ounce by 0628 GMT, following a flat close overnight. Trading volumes were limited in the holiday-shortened week.
"We are still cautious of choppy and illiquid conditions as there is very little depth in this market at present and could be subject to being pushed around," said Alex Thorndike, senior precious metals dealer at MKS Group.
"We suspect we will see an accumulation of interest next week with January historically being generally a positive month for gold. So for now we look to buy dips," he said.
With limited market-moving data due this week, bullion traders will rely on cues from the currency and oil markets.
Gold is positively co-related to oil as the metal is often seen as a hedge against oil-led inflation, while a stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.
Oil prices fell more than 1 per cent on Wednesday after jumping 3 per cent in the previous session.
In the currency market, the dollar rose to nearly a one-week high against a basket of six currencies on Tuesday from a near two-week low hit earlier in the session. It continued to climb on Wednesday.
The dollar is expected to stay firm following the US Federal Reserve's move to hike rates for the first time in nearly a decade this month and indications the central bank would resort to gradual increases in 2016. The outlook for gold does not look very bullish heading into the next year, with several traders and brokerages predicting a drop in prices to $1,000 or below early in 2016.
Assets of SPDR Gold Trust, the top gold-backed exchange-traded fund, are near a seven-year low, while short positions on COMEX gold contracts are close to an all-time high.