* Fed rate hike prospects cap gains
* Dollar index down 0.26 pct
* SPDR Gold holdings fall 0.13 pct on Wednesday
* Palladium hits highest since June 2015
(Adds comment, updates prices)
By Apeksha Nair
Dec 1 Gold prices recovered slightly after
touching a near 10-month low in early trade on Thursday as the
dollar index eased, but growing odds of a U.S. interest rate
hike capped further gains.
Spot gold was up 0.25 percent at $1,175.36 an ounce
by 0711 GMT. The metal hit its lowest since Feb. 5 at $1,163.45
earlier in the session.
U.S. gold futures rose about 0.3 percent to
$1,173.80 per ounce.
The dollar index, which measures the greenback
against a basket of major currencies, eased 0.26 percent to
"Gold has been sensitive to the U.S. monetary policy and
dollar movements," said Mark To, head of research at Hong Kong's
Wing Fung Financial Group. "Inflation as well as pace of
interest rate hike expectations among the investors are
increasing along with the opportunity cost of holding gold."
The metal has been under constant pressure from a strong
U.S. dollar and climbing Treasury yields since President-elect
Donald Trump's policy plan signalled faster inflation.
Strong U.S. data on Wednesday pointed to economic strength
which could further cement the case for an interest rate hike
from the Federal Reserve this month.
Dallas Fed Bank President Robert Kaplan suggested on
Wednesday it was time for an interest-rate raise as the U.S.
economy was making good progress toward full employment with
inflation heading toward the Fed's 2 percent goal.
Traders see about a nine in 10 chance that policymakers will
raise rates when the Fed meets in December.
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.
SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 0.13 percent to
883.86 tonnes on Wednesday.
Elsewhere, political uncertainty in Europe persisted ahead
of Italy's referendum on Sunday, capping the euro, while
European Central Bank (ECB) President Mario Draghi warned of
risks to the continent's prosperity.
Euro zone inflation hit a 31-month high in November,
providing modest relief for the ECB ahead of an interest-rate
decision next week.
"Any rise in geopolitical risks or investor uncertainty in
the months ahead may spur demand for perceived 'safe-haven'
assets, especially gold, but also silver," said James Steel,
chief metals analyst for HSBC Securities.
Silver was 0.4 percent higher at $16.54 an ounce.
Platinum crawled up 0.1 percent to $912 after hitting
its lowest since Feb. 8 at $895 earlier in the session.
Palladium was unchanged at $770.08. The metal touched
its highest since June 2015 at $774.60 earlier.
(Reporting by Apeksha Nair in Bengaluru; additional reporting
by Nallur Sethuraman; Editing by Kenneth Maxwell and Subhranshu