By Jan Harvey
LONDON (Reuters) - Gold edged lower on Monday in line with a retreat in oil prices, giving up some of last week's gains, but moves were muted in thin liquidity in a holiday-shortened week.
The metal rose nearly 1 percent during Christmas week, but remains on track to fall for a sixth successive quarter, its biggest run of quarterly losses since the mid 1970s. It is down 9 percent so far this year.
Prices hit their lowest since early 2010 earlier this month in anticipation of the first U.S. interest rate hike in nearly a decade. Though gold recovered lost ground in the wake of the announcement as dealers holding short positions covered, it remains under pressure.
Spot gold was down 0.3 percent at $1,071.94 an ounce at 1250 GMT, while U.S. gold futures for February delivery were down $4.40 an ounce at $1,071.50.
"Gold is drifting lower after failing to extend the pre-Christmas rally," Saxo Bank's head of commodity research Ole Hansen said. "Although the near-term direction of the dollar is pointing higher, the lack of dollar strength this December has supported gold primarily through the covering of short positions."
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"The first quarter is undoubtedly going to be challenging but in the near-term a break above trendline resistance at $1,078 could signal some additional short-covering towards $1,102," he said.
Oil prices fell more than 2 percent after the long Christmas weekend, with international crude and product markets still well supplied. Gold is positively correlated to oil as the metal is seen as a hedge against petroleum-led inflation. [O/R]
Weakness in oil pressured shares in Europe and Asia in trade thinned by holidays in a number of financial centres. The dollar was little changed, with the key London currency market among those still closed.
Interest in gold was muted in the major gold-buying centres in Asia overnight, dealers said.
"The yellow metal opened up today more or less where it closed on (Dec) 24, either side of $1,076," MKS said in a note. "Some very light initial buying took us up to the daily peak... but this soon dissipated."
Data on Monday showed China's net gold imports from main conduit Hong Kong rose in November from a month before as demand for the metal increased with a drop in prices to multi-year lows.
Silver was the biggest faller of the main precious metals, down 2.2 percent at $14.02 an ounce. Platinum was down 0.1 percent at $880.81 an ounce, while palladium was up 0.1 percent at $559.22 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy and Mark Potter)