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Gold rose on Wednesday to reverse earlier losses, with the U.S. dollar edging away from 14-year highs touched the day before.

Spot gold was up 0.4 percent at $1,135.83 an ounce by 0621 GMT. It fell 0.6 percent in the previous session.

"We are seeing quite a lot of volatility. It is driven by the direction of the U.S. dollar. (Gold) is just marking time before it makes its next big move. It is in a very very strong down channel," said Jeffrey Halley, senior market analyst at OANDA.

"If we see a break of $1,100, a psychological level, we will see more liquidations towards Christmas for sure and it could be an ugly move downwards."

"Any pullback in the greenback may trigger a scramble into gold," HSBC analyst James Steel said in a note.

"Gold may near $1,100 per ounce but we do not think the market will go below that level. If it does break$1,100 per ounce, we would expect bargain-hunters and price sensitive buyers to increase purchases."

"Light trading volume can leave gold and the other precious metals open wide to swings and erratic behaviour on relatively little buying or selling," HSBC's Steel added.

Reference: Reuters