Gold holds around 2-1/2 week high as dollar softens

By Clara Denina

LONDON (Reuters) - Gold steadied below a 2-1/2 week high hit earlier on Tuesday as the dollar softened against the euro due partly to better-than-expected German economic data.

Spot gold was up 0.6 percent at $1,193.60 an ounce by 1539 GMT after earlier reaching its highest since Oct. 30 at $1,204.70. U.S. gold futures also jumped to a near three-week high of $1,204.10.

The metal has rebounded around 6 percent from a 4-1/2-year low of $1,131.85 hit on Nov. 7.

"Gold is finding more strength after we broke the $1,180 resistance level from the fact that the dollar's rally has stalled," said ActivTrades senior analyst Carlo Alberto de Casa. "$1,250 is going to be a very important resistance area."

The dollar slipped 0.3 percent against a basket of major currencies, mostly due to a stronger euro after the ZEW survey showed German economic sentiment rose in November for the first time in almost a year, beating expectations and raising hopes of an improvement in Europe's biggest economy.

A weaker greenback makes dollar-denominated gold less expensive for holders of other currencies.

Gold had dipped earlier in the session as the dollar was boosted by economic data showing that while U.S. manufacturing output rose only modestly, factory activity rebounded in New York State.

Markets were awaiting minutes of the Federal Reserve's October meeting, to be released on Wednesday.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.33 percent to 723.01 tonnes on Monday, the first increase since Nov. 3.

Elsewhere, India's central bank is in talks with the government to increase curbs on gold imports and an announcement could come as early as Tuesday, a finance ministry source said.

More restrictions could hit demand from India and add pressure on gold prices.

In China, local prices held steady at a premium of $2-$3 an ounce to London levels, as buying picked up on steadier international prices.

Among other precious metals, platinum rose 0.5 percent to $1,203.50 an ounce, while palladium rose 0.6 percent to $772.10 an ounce. Silver was up 0.4 percent at $16.17 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Michael Urquhart)