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Gold prices have fallen for eight sessions, marking the yellow metal's worst losing streak in a year, but investment bank Goldman Sachs said further downside was likely limited this year.

The spot gold price was flat around $1,254 an ounce around midday Friday in Asia, not far from the four-month low of $1,249.68 hit in the previous session on increased expectations for a U.S. interest rate hike by year end after U.S. filings for unemployment benefits fell to a 43-year-low last week.

Goldman analysts said they continued to expect U.S. real rates rise into the year-end, weighing on gold prices, but they added that demand for the precious metal will still give some support.

"Indeed, we would view a gold sell-off substantially below $1,250 an ounce as a strategic buying opportunity, given substantial downside risks to global growth remain, and given that the market is likely to remain concerned about the ability of monetary policy to respond to any potential shocks to growth," wrote analysts Max Layton, Mikhail Sprogis and Jeffrey Currie in a note Friday.

An overbuilt property market and a devaluation of the yuan in 2015 made Chinese investors one of the world's largest consumers of gold.

Spot gold prices have lost about 5 percent this week after gaining as much as 30 percent this year, but the recent move lower did not appear to be driven by physical gold exchange-traded fund (ETF) liquidation as holdings have risen in the past week, said Goldman analysts.

They said the bank has a "broadly neutral" outlook on gold with a forecast of $1,280 an ounce at the year-end.

The bank also believed Chinese investment demand for gold may pick up after the current selloff, particularly from medium to long-term asset allocators.

"The potential drivers of increased Chinese physical buying include purchasing gold as a way to hedge for potential currency depreciation in the face of capital controls, and purchasing gold as a way of diversifying away from the property market, which has this year to date had a remarkable rally (with the government moving to rein in speculation and price growth)," the analysts added.