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Bengaluru — Gold edged up on Monday, extending its recovery from a 10-and-a-half-month low hit last week, as the US dollar slipped from a 14-year peak against a basket of currencies.

Spot gold edged 0.3% higher to $1,137.76/oz by 4.07am GMT. The bullion touched $1,122.35 on Thursday, its weakest since February 2.

Gold now appears to have found a base, however, upside will be limited as investors look to other markets for yield, ANZ said in a note.

Gold was likely to rebound to $1,160-$1,180 levels before the year-end, said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

US gold futures gained 0.2% to $1,139.90/oz on Monday. The Fed hiked rates for the first time in a year last week and projected three more increases in 2017, up from the two projected in September. Richmond Fed President Jeffrey Lacker said on Friday the Fed was likely to need to raise interest rates more than three times next year and faced challenges in gradually cooling off the US economy. 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. "Medium- to long-term view [for gold] is not optimistic," said To.

Spot gold could bounce moderately to $1,153/oz as it had found a support at $1,121, said Reuters analyst for commodities technicals Wang Tao.

Hedge funds and money managers cut their net long position in Comex gold contracts for the fifth consecutive week, taking it to a 10-month low in the week to December 13, US Commodity Futures Trading Commission data showed on Friday.

Citi sees gold easing to a second-quarter average of $1,135 before recovering to $1,180 in the final three months of 2017.Silver is seen averaging $15.50 next year.

Credit Suisse Group AG (CS) analysts recently lowered their 2017 gold forecast, pointing to slowing sales of exchange-traded funds (ETFs) and speculation surrounding how the election could impact interest rates. These analysts cut their full-year forecast to $1,338 per troy ounce from $1,438 per ounce, according to Barron's.

Sales of gold-based ETFs, for example the SPDR Gold Trust (GLD) and iShares Gold Trust (IAU), have fallen 7% since November 8. In addition to this flagging activity, the precious metal's price has dropped up to 8% after rising to $1,340 per ounce that night.

Reference: Reuters, Investopodia