Singapore: Gold edged up on Monday on buying interest from Asia but retained most of last week`s losses, as strength in the dollar and equities dulled the metal`s safe-haven appeal.
Price gains could be difficult to hold due to expectations of higher US interest rates and a strong outlook for the dollar.
"The bullion market faces tough upside resistance and further gains may be an uphill battle," said HSBC analyst James Steel.
"A strong US dollar and the likelihood of higher US rates even if inflation remains subdued are a recipe for lower gold prices."
Spot gold had edged up 0.2 percent to $1,197.23 an ounce by 0404 GMT, after losing about 2 percent last week.
In top gold consumer China, prices were at a premium of about $3 an ounce to the global benchmark, in a sign of good buying interest.
But traders were also looking at other factors for cues.
The Federal Reserve, after wrapping up a two-day meeting last Wednesday, signalled it was on track to increase rates next year but said it was taking a patient stance, keeping gold`s losses in check.
Higher interest rates would boost the dollar and hurt non-interest-bearing bullion, which was boosted by central bank liquidity and a low interest rate environment in the years following the 2008 financial crisis.
Trading activity was likely to be thin this week and next, with many investors away for Christmas and the run-up to the New Year`s holiday.
However, some key US economic data is due this week and could have an impact on prices. A robust economy could prompt the Fed to increase rates sooner rather than later.
"Given that we are in the thick of the festive season, traders are likely to let gold prices drift within a range in the coming week," said Howie Lee, an analyst at Phillip Futures, adding that gold could trade in the $1,180-$1,210 range.
Recent data on investor positioning shows that holdings in SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, rose 0.41 percent to 724.55 tonnes on Friday.
Other data showed hedge funds and money managers cut their net long positions in gold and silver futures and options in the week to Dec. 16, a period of choppy trade amid volatility in the dollar and oil prices.
