Spot gold prices edged lower on Thursday, as prospects of slower physical demand weigh on market sentiment, but cautious economic views on the economy offered by the US Federal Reserve lent support.
Physical demand in the region is likely to weaken after the Lunar New Year, which falls on Feb. 3 this year. "Physical buying has started to slow down, after prices have gone up a bit," said a Singapore-based dealer, adding there were also some profit-taking trades.
"There is not much fresh buying, as people are not keen for delivery after the Lunar New Year."
Spot gold edged down 0.1 percent at $1,344.95 an ounce by 0715 GMT. U.S. gold futures rose nearly one percent at $1,344.5 an ounce.
Supporting gold, the Federal Reserve showed on Wednesday that it was in no rush to cut short its efforts to rescue the US economy, saying high unemployment still justified its $600 billion bond-buying plan.
On the fund side, holdings in the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, remained unchanged at its eight-month low of 1,229.581 tonnes, after suffering its biggest one-day drop in the previous session.
"If we are seeing a mass exodus of large funds out of SPDR, it probably means that gold prices will remain relatively weak and investors are standing on the sidelines of the market," said Li Ning, an analyst at Shanghai CIFCO Futures.
Gold investors might have been allured by riskier assets, such as equities, as economic outlook has brightened after a string of upbeat data from the US and Europe.
Spot gold may edge up slightly to $1,349 per ounce, and form a peak around this level, based on its wave pattern and a Fibonacci projection analysis, said Wang Tao, a Reuters market analyst.
But analysts said gold is expected to build on last year's stellar run to hit record highs in 2011, a recent Reuters poll showed.
Platinum group metals have outperformed gold and silver so far this year. Spot platinum lost half a percent at $1,801.70, up nearly two percent year-to-date.
Platinum is likely to outshine gold in the medium term, technical analysts said.