Spot gold firmed a notch after sliding more than one per cent in the previous session, as a dollar rally paused, and resilient physical demand in Asia provided support.
The US dollar weakened in Asia on Thursday but is still seen supported thanks to higher Treasury bond yields, after an agreement to extend tax cuts fed fears of inflation and a swelling deficit.
"The rise in US treasury yield triggered some long liquidation in metals, not only in gold. If you look at the commodities as whole, there's profit-taking," said a Hong Kong-based trader.
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Traders said as the year end approaches, market liquidity is expected to thin out and participants are increasingly square books to take profit before the holidays.
"In the short term things are turning a little bit bearish, after testing the record high on Tuesday. It would not be a surprise even if it correct even further and test the short-term support around $1370."
Spot gold gained 0.4 per cent to $US1386.75 an ounce, after falling to a one-week low of $US1371.45 on Wednesday.
It reached an all-time high of $US1430.95 on Tuesday.
US gold futures edged up 0.3 per cent to $US1387.6.
Spot gold is expected to rebound into a range of $US1394 and $US1401, as an ascending trendline provides support to hold up the sharp correction, said Wang Tao, a Reuters market analyst.
Light physical buying was spotted in early Asian trade, while scrap selling was limited.
"Interestingly we don't see too much gold scrap falling back into the market, after price hit record high. Everybody is still bullish," said Dick Poon, manager of precious metals at Hareaus in Hong Kong.
Poon said physical buying from manufacturers has subsided, while investors, betting on further price rise, continued to buy on the dip.
Premium in Hong Kong for the bullion was little changed at 80 cents to $US1 above London prices, Poon added.
Holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , continued to slip, down 2.43 tonnes to $US1295.296 tonnes by Dec 8.
On base metals market, three-month copper on the London Metal Exchange hit a record high of $US9066 a tonne, underpinned by solid fundamentals.
Spot silver rose one per cent to $US28.62 an ounce, after declining to a one-week low of $US27.96 in the previous session.
