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imageLONDON: Gold rose on Wednesday after the previous session's price drop but was still vulnerable to further losses because strong U.S. data could fuel expectation that the Federal Reserve will soon scale back monetary stimulus.

With Thursday's Thanksgiving holiday in the United States approaching, market activity may slow and not pick up until next week, traders said.

Ahead of that, however, the market will watch a flurry of U.S. data, including the October durable goods report, weekly jobless claims, the Chicago PMI and final Michigan sentiment survey for November.

"I wouldn't expect much happening with Thanksgiving tomorrow ... but, if the data today comes in positive, there is always the question of whether the Fed could move to announce tapering in December or January," Societe Generale analyst Robin Bhar said.

Spot gold was up 0.5 percent at $1,249.13 an ounce by 1258 GMT. It lost nearly 1 percent in the previous session after strong U.S. housing data.

U.S. gold futures were up 0.6 percent at $1,248.60 an ounce.

However, technical analysts said that as long as gold remains below $1,300 it faces the risk of further declines.

The dollar edged 0.1 percent lower against a basket of currencies as U.S. Treasury yields steadied at 2.7 percent.

The next major data release is on Dec. 6, when non-farm payroll figures are scheduled. The Fed's next policy meeting will be held Dec. 17-18.

The gold price has fallen by more than 25 percent this year as investors pulled money out of bullion to invest in higher-yielding equities on signs the U.S. central bank would start withdrawing stimulus.

Economists polled by Reuters expect the U.S. central bank to begin tapering in March, with a small chance it could do so as early as January.

Until then, the Fed will carry on creating $85 billion of new money every month by purchasing bonds for its own portfolio.

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