Gold snaps losing streak; rises above $1,200 as stocks steady

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold snapped a three-day losing streak on Wednesday, in choppy trade that saw the metal swing between gains and losses around the key $1,200 an ounce level as stock markets consolidated recent gains.

The stock market stabilisation, after last week's rout on concerns about the global economy, has reduced investor interest in gold as a safe-haven asset. The yellow metal hit a one-year high of $1,260.60 an ounce last week.

Spot gold rose 0.5 percent to $1,205.56 an ounce by 0339 GMT, after earlier dropping to a session low of $1,195.40. It lost 3.7 percent in the previous three sessions.

Concerns remain that gold could correct further as some analysts say gold gained too much, too quickly.

"Gold's price performance thus far this year... could prove to be unsustainable," Societe Generale analyst Robin Bhar said in a note on Tuesday.

Fears over the global economy are likely to fade and U.S. interest rate hikes will return to the agenda, hurting bullion, Bhar said.

Earlier this week, Goldman Sachs also said investors should short gold, as it believes the recent rally has been overdone.

Sentiment was not helped by news that John Paulson, one of the world's most influential gold investors, slashed his bets on bullion at the end of last year by cutting his stake in the top gold-backed exchange traded fund by 37 percent.

Global stock markets have calmed since last week's declines. Asian shares were taking a breather on Wednesday after two sessions of solid gains, while U.S. shares registered gains in Tuesday's session.

The dollar has recovered from multi-month lows hit last week against the euro and the yen.

Despite the recent losses, gold has risen 13.1 percent in 2016, making it the best performing asset this year.

Investors will be eyeing the minutes of the Federal Reserve's Jan. 26-27 meeting to be released later on Wednesday to gauge the U.S. central bank's view of the economy and its outlook on interest rates.

Speculation has increased in recent days that the Fed might resort to negative interest rates to stimulate the economy after Fed Chair Janet Yellen said last week it was an option that would not be taken "off the table."

Lower or negative rates would boost demand for non-interest-paying gold.

However, Boston Fed President Eric Rosengren said on Tuesday it would take a grimmer economic picture to prompt the central bank to cut rates. The Fed raised interest rates in December for the first time in nearly a decade.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford and Christian Schmollinger)