Gold recovered on Thursday from overnight losses prompted by the Federal Reserve's decision to cut back its stimulus, indicating that investors had already priced in a small reduction in the central bank's bond purchases.
Gold's reaction to the much-feared taper also showed that the metal was unlikely to deepen a 27 percent loss this year - its first annual drop in 13 years.
Fundamentals
* Spot gold had risen 0.4 percent to $1,222.96 an ounce by 0021 GMT. It lost about 1 percent in the previous session, falling to its lowest since December 6, hurt by a stronger dollar and rallying equities.
* U.S. gold declined about 1 percent on Thursday, tracking overnight losses in spot gold.
* Bullion had been supported by the Fed's stimulus as the bond purchases burnished its inflation-hedge appeal.
* The Fed trimmed the pace of its monthly asset purchases by $10 billion to $75 billion, and sought to temper the long-awaited move by suggesting its key interest rate would stay at rock bottom even longer than previously promised.
* At his last scheduled news conference as Fed chairman, Ben Bernanke said the purchases would likely be cut at a "measured" pace through much of next year if job gains continued as expected, with the programme fully shuttered by late-2014.
* SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 4.20 tonnes to 812.62 tonnes on Wednesday.
* The U.S. Senate passed a two-year budget deal to ease automatic spending cuts and reduce the risk of a government shutdown, but fights were already breaking out over how to implement the budget pact.
Market news
* Global markets have reacted surprisingly well to the long-dreaded decision by the Fed to trim its stimulus, with Wall Street stocks at record heights and the dollar above 104.00 yen for the first time since 2008.
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