Gold rose more than 1 percent on Friday, recovering from its biggest daily loss in five months as stocks and the dollar retreated, but remained near multi-year lows after the Federal Reserve lifted U.S. interest rates.
The metal has recovered some lost ground after bottoming out on Thursday at $1,047.25 an ounce, within a couple dollars of a near six-year low reached on Dec. 3, after the first U.S. rate hike in nearly a decade.
Rising rates lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
was up 1.3 percent at $1,065.91 an ounce, while U.S. gold futures for February delivery settled up 1.5 percent at $1,065 an ounce.
"There are big volatile swings but the overall tone is still lower," said Bill O'Neill, co-founder of commodities investment firm Logic Advisors in New Jersey.
"It's become more dollar oriented than it has been for much of the year."
O'Neill added that weak stock markets also pressured bullion prices, with global equities falling on concerns about slumping crude oil prices that may be signalling slower growth.
The U.S. dollar eased 0.5 percent.
"Next year the macro picture is looking a little less negative for gold and precious," Mitsubishi analyst Jonathan Butler said.
"The Fed, from its forecasts, is anticipating four rate rises next year. The markets are saying something different - the Fed funds futures currently suggests there'll be just two rises, in June and December."
The metal could revisit $1,000 an ounce for the first time in six years if it breaks below its early December low at $1,045 an ounce, according to technical analysts.
"If we can take the low out, which I don't think is unreasonable, $1,033 is the next stop - that's the high from 2008 - and then $1,006, and the $1,000 figure is really the level you should be talking about," Credit Suisse analyst Christopher Hine said.
"It is achievable (by the end of the year)," he said.
Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell another 4.5 tons on Thursday to 630.17 tons, the lowest since September 2008. That brings its monthly outflow to 25 tons.