London: Gold edged slightly higher as global equities and the dollar drifted lower on Monday, although expectations of tighter US monetary policy kept a lid on its gains.

Spot gold edged up 0.4% to $1,138.85 an ounce by 1310 GMT. It fell to $1,122.35, its weakest since 2 February, on Thursday under pressure from a stronger dollar after hawkish rate forecasts from the Federal Reserve.

US gold futures gained $3.20 to $1,140.70 an ounce.

The Fed hiked rates for the first time in a year last week and projected three more increases in 2017, up from the two projected in September.

“Coming at a time when investors are mindful of the stimulus effects of the new incoming US regime (this) is likely to be good for equity valuation and weigh on gold and risk-off assets, at least in the short term," Mitsubishi Corp strategist Jonathan Butler said.

The dollar was unchanged against a basket of six main currencies, European equities were mixed and US stock index futures were slightly higher as investors awaited a speech by Federal Reserve chair Janet Yellen on “the State of the Job Market".

Richmond Fed president Jeffrey Lacker said on Friday the Fed faces challenges in gradually cooling off the US economy.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

“I won’t be surprised if gold prices move down to $1,050 to $1,080 by the start of next year," said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.63% to 836.99 tonnes on Friday. Holdings are down over 11% since November.

“(The fall in ETF holdings) illustrates the view investors are moving away from gold at least for the medium term," Wing Fung’s To said.

Hedge funds and money managers cut their net long position in COMEX gold contracts for the fifth straight week, taking it to a 10-month low in the week to 13 December, US Commodity Futures Trading Commission data showed on Friday.

Silver fell 0.4% to $16.03 an ounce. Platinum fell 1% to $918.60 and palladium was down 1.8% at $680.22 an ounce, after falling to a one-month low on Friday. Reuters