Gold settled marginally higher on Friday, supported by some physical buying, but remained on track for its biggest annual loss in three decades as rallies in equities and prospects of global economic recovery dented its appeal.
Expectations that the U.S. economy can stand on its own as monetary stimulus is withdrawn were buoyed by data on Thursday showing a decrease in weekly jobless claims, which propelled stock markets higher.
Germany's benchmark index DAX touched a record high, while U.S. Treasury yields hit their highest since July 2011, above 3 percent.
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"The market is probably going to stay in wide ranges for the next few sessions, and there will still be some support from Asian buyers ahead of the Chinese New Year at the end of January,'' said VTB Capital analyst Andrey Kryuchenkov.
"But volumes are very thin now, and we need to wait for when the Western investors come back (from holidays) to see what they will be doing,'' he added. "I think they will liquidate again into this price rebound as there is no fundamental reason to buy the metal.''
Prices should hold between $1,190 and $1,220 an ounce over the next few sessions, with moves likely to be exacerbated by a lack of liquidity during the year-end holiday period, traders at MKS Capital said.
Bullion fell to a six-month low of $1,185.10 last week, after the Federal Reserve said it would begin tapering its $85 billion in monthly bond purchases next month, before recovering slightly.
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