Gold was heading for its first drop in three years on Friday, with its safe-haven appeal diminished by a global economic recovery, and as major central banks prepared to raise interest rates to contain inflation.
Heading into 2022, while concerns about the effect of the Omicron variant could support gold prices, higher Treasury yields might tarnish the metal's appeal, said Han Tan, chief market analyst at Exinity.
"Gold could see several catalysts for substantial gains next year, be it a Fed policy mistake, stubbornly elevated inflation, or even a spike in geopolitical tensions."
Spot gold rose 0.2% to $1,816.51 per ounce by 1211 GMT. US gold futures rose 0.3% to $1,819.70.
Year-end risk hedging has pushed gold higher overnight, with resistance at $1,820, said Jeffery Halley, a senior market analyst at OANDA.
The dollar index is set for its largest percentage rise in six years, driving gold's slide by making greenback-priced bullion more expensive for overseas buyers.
Dragged by the dollar, gold prices have declined about 4% so far this year, their worst in six, after big gains over the previous two years, as the global economic recovery reduced demand for the safe-haven metal.
Earlier this month, US Federal Reserve policymakers agreed to speed up the wind-down of the central bank's pandemic-era bond-buying program, with a plan to end asset purchases in March to allow time for three interest rate hikes they now believe will be needed next year.
Higher interest rates increase the opportunity cost of holding non-yielding bullion, and lift US Treasuries and the dollar, omnipresent influences on gold prices.
A Reuters poll in October showed analysts estimated that gold would average about $1,750/ounce in 2022, trimming earlier forecasts citing pressure from potential interest rate hikes.
However, "gold held up reasonably well given all the pro-growth development and all the normalisation in monetary policy," said Dominic Schnider, head of commodities and APAC forex at UBS Wealth Management in Hong Kong.
Spot silver rose 0.2% to $23.07 an ounce, while platinum dropped 1.1% to $950.51, and palladium fell 3.4% to $1,897.77, all on track for their biggest annual falls in several years.