Singapore: Gold jumped around 1 percent higher on Tuesday after a break above USD 1,280 an ounce triggered chart-based buying, but gains could be capped by a firmer US dollar and rallies in equities.
Tensions between Russia and Ukraine as well as violence in the Middle East have so far failed to stir up strong demand from investors, although some jewellers started buying bullion after prices dropped below USD 1,300.
Cash gold hit a session high at USD 1,290.80 an ounce and stood at USD 1,289.30 by 0721 GMT, up USD 12.96.
Prices hit a two-month low of USD 1,273.06 on Aug. 21 on speculation of an eventual increase in US interest rates.
"We`ve been on a downtrend for so many days, so what we see today is technical buying at USD 1,282 and USD 1,283," said a dealer in Hong Kong. "The physical market is a bit quiet after a rush in buying yesterday, and we`ve got to see if the gain is sustainable or short-lived."
Asian shares held firm while the euro hit one-year lows on Tuesday as investors increasingly expect the European Central Bank to expand liquidity as soon as next week to boost the sagging euro zone economy.
A firm US dollar makes bullion more expensive for holders of other currencies and could keep prices below the recent highs above USD 1,300 an ounce, said dealers.
"We are seeing some physical demand but it`s not enough to make the market higher. I think the US dollar is a bit too strong. USD 1,240 to USD 1,250 should be very good support levels," said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo.
Spot gold may rebound moderately to a resistance at USD 1,283 before testing a support at USD 1,273 per ounce, as indicated by its wave pattern and a Fibonacci projection analysis, according to Reuters market analyst Wang Tao.
China`s net gold imports in July from main conduit Hong Kong tumbled to their lowest since June 2011 because the country already has ample supply from shipments in earlier months, while jewellers there are waiting for lower prices.
The country`s crackdown on corruption could have also sapped demand in China, which overtook India as the biggest consumer of the precious metal last year with imports topping 1,000 tonnes.
US gold rose USD 11.60 an ounce to USD 1,290.50.
SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, said its holdings fell 0.37 percent to 797.09 tonnes on Monday from 800.08 tonnes on Friday.
"We`ve been selling some gold but a bank holiday in London yesterday slows us a little," said a physical trader in Singapore. "There are bargain hunters around, but I guess the physical market is still quiet."
Premiums for gold bars in Hong Kong rose to 70 cents to 1.10 to the spot London prices, higher than the 50 cents to USD 1.00 quoted late last week. In Singapore, premiums were steady at 80 cents to USD 1 an ounce to spot London prices.
