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Spot gold slips after FOMC minutes; futures end lower

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Gold eased on Wednesday, halting a three-day winning streak, after the Federal Reserve released the minutes from its mid-December meeting.

U.S. central bankers reviewed a broad set of data showing that the economic recovery in the United States was holding its own in a world that was turning in the wrong direction—with recession threatening in Japan and Europe and a slowdown in major emerging markets, according to the minutes.

But with inflation still low, and the economic outlook for the euro zone and Japan darkening, the Fed struggled for how best to square the circle—acknowledging improvement in the United States while not committing to any particular timetable for raising rates.

Spot gold fell 0.4 percent to $1,213 an ounce, after jumping to its highest since Dec. 15 at $1,222.40 in the previous session, due to tumbling equity markets.

U.S. gold futures for delivery in February settled $8.70 lower at $1,210.70 an ounce.

Gold's near-term resistance for the closing price is expected at $1,220, while a close above that level would shift the focus to further gains, with a target of $1,250, technical analysts at ScotiaMocatta said.

"Prices recovered above $1,200 as all these worries about Greece's future in the euro zone increased some safe-haven bids, but unless the situation worsens, this should just give temporary support to gold," Julius Baer analyst Carsten Menke said.

"The longer-term outlook remains one of progressive economic recovering in the United States leading to a first interest rate hike in the second half of the year."

The dollar rose 0.7 percent against a basket of major currencies, trading close to a nine-year peak and making dollar-denominated gold more expensive for holders of other currencies.

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Gold has benefited from years of increased central bank liquidity and a low interest rates environment, while higher U.S. interest rates would encourage investors to put money into interest-bearing assets like stocks and bonds.

The metal was also undermined by the sharp oil price drop, which reduces gold's appeal as a hedge against oil-led inflation, and recovering European stocks, which halted a three-day fall that was due to mounting concerns over Greece's future in the euro zone.

However, increasing speculation that Greece might exit the euro zone if a left-wing party that wants to cancel austerity measures wins the Jan. 25 elections could lift gold's demand from investors looking for protection, traders said.

The metal had regained the important $1,200 level for the first time in three weeks on Tuesday, also boosted by softer-than-expected U.S. economic data, which added to its appeal as an alternative investment.