Gold rises as dollar drops, breaks four-day drop

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold rose on Tuesday, snapping a four-session losing streak, boosted by a drop in the dollar index and expectations of Asian physical demand following bullion's tumble to a four-year low.

The yellow metal was supported as the dollar dropped against the euro on a report citing internal tensions within the European Central Bank over the leadership style of its chief, Mario Draghi, that has the markets expecting limits on future loosening of monetary policy. [FRX/]

So far, bullion demand from the price-sensitive Chinese and Indian markets, the world's biggest gold buyers, were only modest. However, gold's drop below a key chart level of around $1,180 an ounce should trigger more interest in the near term, dealers said.

"We expect that greater emerging-market demand would accompany further price declines," said James Steel, chief metals analyst at HSBC.

Spot gold was up 0.3 percent at $1,167.75 an ounce by 2:09 p.m. EDT (1809 GMT), while U.S. COMEX gold futures for December delivery settled down $2.10 at $1,167.70.

Analysts say investors are seeking downside protection through gold options. Comex data showed open interest in $1,075 December put options, which give the buyer the option to sell at that price, has surged by more than 3,500 lots in the past two sessions.

From a technical perspective, analysts flag up a band of chart support for gold between $1,155 an ounce, the 61.8 percent retracement of gold's rally from its 2008 lows to its 2011 record high at $1,920.30, and $1,180.

Elsewhere, the top gold exchange-traded fund, SPDR Gold Shares, posted a very small inflow of 0.01 tonnes on Monday, its first uptick since Oct. 16. Holdings are still close to a six-year low of 741 tonnes hit last week.

Among other precious metals, silver was down 0.6 percent at $16.01 an ounce.

Spot platinum was down 0.9 percent at $1,221.99 an ounce, while spot palladium dropped 1.7 percent to $785.50 an ounce.

(Additional reporting by Clara Denina in London and A. Ananthalakshmi in Singapore; Editing by Jane Baird and David Goodman)