Gold inched up on Friday as higher oil prices boosted its safe-haven appeal, but the metal looked set to post its third straight weekly loss, weighed down by a strong dollar.
Bullion ended 2014 down nearly 2 per cent, following a 28 percent slump the previous year, as its investment appeal tapered amid better-performing equities.
Many analysts expect another tough year for gold, with the dollar expected to gain further on expectations of higher US interest rates and a recovering economy.
“We think it is likely that gold may test $1,000 in 2015, but thereafter we expect a rebound in prices as investors may rush in to buy the precious metal on dips,’’ said Howie Lee, analyst at Phillip Futures, in a note this week.
A strong dollar, global deflationary pressures, slowing Chinese demand and higher rates will hurt gold prices, Lee said.
Spot gold rose 0.3 per cent to $1,185.20 an ounce by 0732 GMT, following an uptick in oil. Liquidity was thin in post-holiday trading, with Chinese and Japanese markets closed on Friday.
Brent and US crude futures edged higher on the first trading day of 2015 in Asia, supported by last week’s larger-than-expected fall in US crude stocks, although China’s lacklustre economic data capped the gains. Higher oil prices support gold as the metal is seen as a hedge against oil-led inflation.
Despite Friday’s gains, bullion is still down nearly 1 per cent for the week due to robust dollar. The dollar index, a measure of the greenback's strength against a basket of six major currencies, hit its highest level in nearly nine years on Friday.
The index ended 2014 with its biggest annual increase since 1997, boosted by strong US economic data and expectations of higher interest rates. A strong dollar makes gold more expensive for holders of other currencies and also reduces its appeal as a hedge.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.25 per cent to 709.02 tonnes on Wednesday — a fresh six-year low.