LONDON: Gold slipped on Wednesday as the dollar strengthened and global shares clawed their way off two-month lows, though the precious metal was underpinned by the view that the dollar's bear run remains in place despite rate hike expectations.
The dollar rose versus the euro on disappointment over reports that the leader of Germany's Social Democrats (SPD), Martin Schulz, would not be taking over as finance minister for Europe's biggest economy.
A stronger dollar makes dollar-priced gold costlier for non-US investors.
Gold, seen as a safe haven asset, has failed to capitalise this week from the biggest selloff in six years in global equities, but the precious metal, still driven largely by dollar movement, is not poised to unwind.
"The general scenario for gold is still positive. What we are seeing now (on the stock markets) is just a correction, and the dollar is still weakening (longer term)," said Carlo Alberto De Casa, chief analyst at Activtrades.
"I'm expecting gold to remain above $1,300 in the next few months. The problem for gold would be four (US) rate hikes, but I don't believe (that will happen). At this stage inflation is still under control," he added.
Spot gold had dipped 0.1 percent to $1,323.88 per ounce, as of 1445 GMT. Prices fell over 1 percent to hit their lowest since Jan. 11 at $1,319.96 on Tuesday.
US gold futures for April delivery fell 0.2 percent to $1,326.80 per ounce.
World stocks clawed their way back from two-month lows on Wednesday, though momentum was weak.
Traders dialled back bets the US central bank would ratchet up the pace of rate increases on Monday to between two and three hikes from three to four hikes last week, according to interest rates futures.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 1.4 percent to 829.27 tonnes on Tuesday from Monday.
Holdings saw their worst one-day fall since December 2016.
Spot gold may test a support at $1,316 per ounce, as suggested by a retracement analysis and a head-and-shoulders, according to Reuters technical analyst Wang Tao.
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