Gold inches higher as dollar gains

LONDON, Jan 18 (Reuters): Gold edged higher on Thursday after hitting its lowest in nearly a week as the dollar pared gains, but analysts said bullion was vulnerable to more losses.
Spot gold was up 0.2 per cent at $1,330.01 per ounce by 1100 GMT. Earlier in the session, it touched its lowest since Jan. 12 at $1,323.70.
US gold futures for February delivery slipped 0.7 per cent to $1,330.20 per ounce.
In the previous session, spot gold fell 0.8 per cent, 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 US 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 gained as a rise in US Treasury yields prompted some investors to buy the greenback, but it drifted back from its highs. The dollar got a boost after data showed on Wednesday that US industrial production increased more than expected in December.
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 per cent on Wednesday, dropping below $10,000 due to investor fears that regulators could clamp down.