Singapore: Gold was hovering below USD 1,200 on Tuesday and looked likely to fall to its lowest in six months in thin year-end trade, with strong U.S. spending data hurting the metal's safe-haven appeal.
The impending tapering of the Federal Reserve's stimulus measures also dimmed gold's allure as a hedge against inflation.
Gold is down nearly 30 percent for the year, and is headed for its biggest annual decline in 32 years.
"Prices will likely remain under pressure over the short-term as a combination of stronger U.S. macro statistics, higher equity markets and continued outflows of money from gold exchange-traded funds weigh on sentiment going into 2014," said INTL FCStone analyst Edward Meir.
Spot gold had eased 0.03 percent to USD 1,198.41 an ounce by 0300 GMT, after dropping 0.3 percent in the previous session.
It fell to a six-month low of USD 1,185.10 last week after the Fed announced it would begin tapering its USD 85 billion in monthly bond purchases from next month, before recovering slightly on short-covering.
Asian markets took cheer on Tuesday after Wall Street rang up more records and upbeat U.S. spending data burnished the outlook for the global economy, with Japan's Nikkei hitting a 2013 high.
U.S. consumer sentiment hit a five-month high heading into the end of the year and spending notched up its strongest month since the summer, the latest signs of sustained vigour in the economy that are fostering hopes of a strong 2014.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 8.40 tonnes to 805.72 tonnes on Monday - the lowest in nearly five years.
Traders feared gold could test six-month lows in thin pre-holiday trade.
"The next support level for gold is $1,180. If the market breaks this level we could see a test of $1,150," HSBC analysts said in a note.
"Quiet holiday trading leaves bullion open to volatile movements in either direction as relatively little buying or selling can move the market in thin conditions."
On the physical side, premiums for China's 99.99 percent purity gold traded on the Shanghai Gold Exchange climbed to $21 an ounce from Monday's $16, indicating that sub-$1,200 price level was stoking demand.
First Published: Tuesday, December 24, 2013, 10:47