Gold inches up after losses, but still near three-week low

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold edged up on Tuesday after sharp overnight losses, but was still stuck near its lowest in three weeks due to weaker oil prices and strength in global equities and the dollar.

Spot gold was up 0.3 percent at $1,178.60 an ounce at 0328 GMT. It tumbled nearly 2 percent in the previous session, dropping to $1,170.17 an ounce - its lowest since Dec. 1.

"Skyrocketing equity markets, a firm dollar and weakening oil prices finally caught up to gold, triggering long liquidation and position squaring ahead of the Christmas and New Year break," said Jason Cerisola, a metals dealer at MKS Group.

Rising equities and a stronger dollar dull demand for gold as a safe-haven asset. Lower oil prices decrease its appeal as a hedge against oil-led inflation.

Gold should likely see some support at $1,170, but more stop-loss orders will be triggered if the level is breached, Cerisola said.

Wall Street closed at historic highs on Monday, boosting global equities. The dollar index, a measure of the greenback's strength against a basket of major currencies, was holding close to a nine-year peak.

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

Oil prices resumed their downward march on Monday, after Saudi Arabia's powerful oil minister said OPEC would not cut production at any price, though they edged up modestly on Tuesday.

Bullion found some support in the physical markets, where top consumer China saw bargain hunters emerge after the price drop on Monday.

Prices on the Shanghai Gold Exchange were at a premium of $4-$5 an ounce over the global benchmark, compared with $2-$3 in the previous session.

"While emerging market buying on dips is likely to moderate further potential price declines, ongoing oil market weakness is a significant weight on bullion and may very well cap rallies," HSBC analysts said in a report.

In central bank activity, data from the International Monetary Fund data released on Tuesday showed that Russia raised its gold reserves for an eighth month in a row in November, while Ukraine reduced bullion holdings for a second straight month.

Significant buying and selling by central banks can influence gold prices.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)