* ECB set to extend asset purchase programme this week
* Traders eye Fed meeting next week, expecting rate hike
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates throughout, adds LONDON dateline)
By Jan Harvey
LONDON, Dec 7 (Reuters) - Gold firmed on Wednesday after falling for eight out of the last 10 sessions, on perceptions that a recent surge in the dollar, sharper risk appetite and expectations for a U.S. interest rate hike next week are already reflected in prices.
The metal extended losses earlier this week after its biggest monthly fall in more than three years in November, as a host of negative factors in the broader markets met waning physical demand in major consumers China and India.
It has found good support, however, at the $1,172 level, a chart retracement of its December to July rally.
Spot gold XAU= was at $1,171.34 an ounce at 1030 GMT, up 0.1 percent, while U.S. gold futures GCv1 for February delivery were $3.00 an ounce higher at $1,173.10.
"This probably indicates that most of the selling pressure we've seen, particularly in the futures market, has started to fade," Saxo Bank's head of commodity research, Ole Hansen, said.
"You can take a view that most of the bad news for gold has now been priced in, given the sharp sell-off and the sharp reduction we've seen in positioning."
Gold's next move will likely be dictated by the currency markets. The dollar held steady against the euro on Wednesday before major central bank meetings next week. FRX/
The European Central Bank is expected to extend its quantitative easing programme when it meets on Thursday, but questions remain over whether it will scale back its monthly asset purchases and send a formal signal on the eventual end of that programme.
The Federal Reserve is expected to lift interest rates at its forthcoming meeting next week. That would likely weigh on gold, as rising U.S. rates raise the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
"For now it appears some stability has come into financial markets, with signs that the U.S. dollar has been tightening over the past few days," MKS said in a note. "This is likely due to some profit taking ahead of the major upcoming risk events including the ECB policy meeting and (Fed)."
Among other precious metals, silver XAG= was up 0.4 percent at $16.78 an ounce.
Palladium XPD= was down 1.1 percent at $728.25, while platinum XPT= was 0.6 percent lower at $928, after hitting a more than three-week high in the previous session.
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