Gold retains losses as dollar, oil eyed for cues

SINGAPORE (Reuters) - Gold drifted in a tight range on Wednesday, holding overnight losses, as investors awaited cues from the dollar and oil markets in thin pre-holiday trade.

FUNDAMENTALS

* Spot gold was little changed at $1,073.46 an ounce by 0040 GMT. The metal eased 0.6 percent on Tuesday, snapping a two-day rally.

* Bullion failed to get a lift from a softer dollar, weak U.S. housing data and a modest rebound in oil prices.

* The dollar slipped against a basket of currencies on Tuesday as more traders booked profits on bullish greenback bets following the Federal Reserve's interest rate increase last week and a steep drop in existing home sales in November.

* A softer dollar would have typically sent greenback-denominated gold higher.

* U.S. home resales posted their sharpest drop in five years in November. Other data on Tuesday showed the U.S. economy grew at a fairly healthy clip in the third quarter as strong consumer and business spending offset efforts by businesses to reduce an inventory glut.

* Elsewhere, oil prices stabilized after earlier plumbing multi-year lows. Gold is positively co-related to oil as the metal is seen as a hedge against old-led inflation.

* Trading is expected to be quiet as liquidity thins ahead of the Christmas holiday. Japanese markets were closed on Wednesday.

* Gold could see some sharp moves as dealers square their books in year-end trading. Short positions on COMEX gold are at a record high, according to recent U.S. government data, a factor that could trigger some short covering.

* But investor sentiment towards gold remains largely bearish as its fate depends on the outlook of the dollar and the pace of the Fed's future rate hikes.

* Several brokerages have predicted a drop below $1,000 an ounce next year. Assets of the top gold exchange-traded fund are near a seven-year low.

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(Reporting by A. Ananthalakshmi; Editing by Ed Davies)