* ECB set to extend asset purchase program this week
* Traders eye Fed meeting next week, expecting rate rise
* GRAPHIC-2016 asset returns: reut.rs/1WAiOSC
(Adds comment, byline, NEW YORK dateline; updates prices)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, Dec 7 Gold extended its rise on
Wednesday, rebounding from this week's 10-month low as the
dollar eased against the euro ahead of a European Central Bank
meeting and on the view that a U.S. rate rise next week was
already reflected in prices.
In November, the yellow metal posted its biggest monthly
fall in more than three years. The losing streak spilled into
December as fears of U.S. rate rise, an increased appetite for
risk and a stronger dollar all weighed on prices at a time of
waning demand from top consumers, China and India.
Gold prices found solid support, however, at the $1,172
level, a chart retracement of its December-to-July rally.
Spot gold was up 0.3 percent at $1,173.32 an ounce by
2:47 p.m. EST (1947 GMT), up 0.6 percent, up from Monday's
10-month low at $1,157.
U.S. gold futures for February delivery settled up
0.6 percent at $1,177.50.
"The metal lost 8 percent during the month of November,
thanks to the Fed, which is expected to increase the interest
rate this month," said Naeem Aslam, Think Markets' chief market
"We think that the interest rate story is largely baked into
the gold price, and when the Fed increases rates, we may not see
much of a move," Aslam added.
Any shift in gold prices will likely be dictated by the
currency markets. The dollar edged 0.1 percent lower against the
euro on Wednesday ahead of key central bank meetings.
"Today is a little more of a pause," said Rob Haworth,
senior investment strategist for U.S. Bank Wealth management in
"I think rates moving higher is the primary headwind to gold
moving into next year and the market doesn't really get the
benefit from rising inflation," he said, referring to
expectations for the Federal Reserve to raise U.S. interest
The Fed is expected to hike rates at its meeting next week,
a move seen as negative for gold, as higher U.S. rates lift the
opportunity cost of holding non-yielding bullion, while boosting
the dollar, in which it is priced.
The European Central Bank is expected to extend its
quantitative easing program when it meets on Thursday, but
questions remain over whether it will send a formal signal on
the eventual end of that program.
Among other precious metals, silver was up 2.6
percent at $17.14 an ounce, after rising to $17.24, the highest
since Nov. 14.
Palladium was down 0.7 percent at $731.50, while
platinum was 0.7 percent higher at $940.80.
(Additional reporting by Swati Verma and Nallur Sethuraman in
Bengaluru; editing by David Clarke and G Crosse)