* Spot gold could fall to $1,250 by mid year - Julius Baer
* Falling digital currencies could support gold - analysts
* Spot gold vs bitcoin: http://reut.rs/2DgiRiK
(Adds graphic, updates prices) LONDON, Jan 18 (Reuters) - Gold edged higher on Thursday after hitting its lowest in nearly a week as the dollar weakened, but analysts said bullion was vulnerable to more losses.
Spot gold was up 0.2 percent at $1,330.71 per ounce
Jan. 12 at $1,323.70.
U.S. gold futures for February delivery slipped 0.6
percent to $1,331 per ounce. In the previous session, spot gold fell 0.8 percent, posting its worst one-day percentage decline since Dec. 7 as the dollar bounced from three-year lows. "Gold continues to trade in lock-step with the U.S. dollar," said Carsten Menke, analyst at Julius Baer in Zurich. "We think the dollar has fallen too much. We see more upside for the dollar heading into the second quarter so that means that gold should move back below $1,300 and towards $1,250 by mid-year."
The dollar index reversed direction and went into the
red as global investors sought to diversify their dollar holdings into other currencies such as the euro. Spot gold is expected to fall to $1,311 per ounce, as it has broken a support at $1,329, according to Reuters technical analyst Wang Tao. Some analysts said a correction in digital currencies could support gold. "Brokers in Europe report investors have increasingly been asking about switching from cryptocurrencies into gold," ANZ analysts said in a research note.
Bitcoin fell as much as 20 percent on Wednesday,
dropping below $10,000 due to investor fears that regulators could clamp down.
In other precious metals, silver gained 0.6 percent to $17.11 per ounce and palladium shed 0.9 percent to
$1,104.72 per ounce.
Platinum added 1 percent to $1,006.60 per ounce,
after touching its highest since Sept. 8 at $1,007.60 in the previous session. Over the past 15 years, platinum has largely moved higher in January and February due to seasonally weaker supply from top producer South Africa, Menke said. "This seasonal rebound is playing out. And there is also some more room from short covering from the futures market."
(Additional reporting by Nallur Sethuraman and Nithin Prasad in Bengaluru; Editing by Alexander Smith and Jane Merriman)