By Clara Denina
LONDON (Reuters) - Gold edged lower on Thursday and was vulnerable to further weakness as the dollar rebounded and ahead of a widely anticipated U.S. interest rate rise next week.
The Federal Reserve is expected to raise rates for the first time in nearly a decade at its next policy meeting on Dec. 15-16. Higher rates should dent demand for non-interest-paying gold, which has already lost 9 percent of its value this year and is on track for its third year of losses.
Spot gold was down 0.1 percent at $1,071.15 an ounce by 1541 GMT, while U.S. gold futures were down 0.5 percent at $1,070.80 an ounce.
"Although a U.S. rate hike should be priced in, gold's initial reaction will be to the downside," Commerzbank analyst Daniel Briesemann said.
The metal slid to $1,045.85, its lowest since February 2010, last week, when the dollar spiked to its highest level in 12-1/2 years following Fed chair Janet Yellen's hint at a U.S. rate rise this month.
The technical picture for gold looks neutral at $1,064-$1,084, but the bias is towards the downside, Reuters technical analyst Wang Tao said.
The dollar rose 0.5 percent against a basket of leading currencies, recouping some of its 1.1 percent loss on Wednesday.
A slide in the oil price to a seven-year low, along with a dip in broader commodity markets, added to pressure on gold.
Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.
"Given the level of distress across the commodities complex, it wouldn't be surprising to see a test towards the $1,000 level," ING Bank senior strategist Hamza Khan said.
In physical markets, gold premiums in India fell this week as a modest rebound in prices from multi-year lows prompted consumers to postpone purchases, but buying interest in China remained strong ahead of the Chinese new year holiday early in 2016.
Silver rose 0.1 percent to $14.12 an ounce.
Platinum fell 1 percent to $847.94 an ounce, after touching a seven-year low last week, and palladium dropped 0.9 percent to $542.60 an ounce.
"Selling pressure from deleveraging and short selling, combined with an absence of buying interest, seems to be behind (platinum and palladium) price weakness as buyers have stepped to the sidelines to buy on a hand-to-mouth basis," Scotiabank said.
"Given the significant sell-off in prices in 2015, we believe 2016 will see prices recover and that in turn is likely to prompt bargain hunting and restocking."
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Susan Fenton and Jane Merriman)
