Gold ticks up but stuck near two-month low on firm dollar

By Lewa Pardomuan

SINGAPORE (Reuters) - Gold regained some strength on Tuesday on bargain hunting but still held near its weakest level in two months as a firmer U.S. dollar and rallies in equities undermined the metal's appeal as an alternative investment.

Tensions between Russia and Ukraine as well as violence in the Middle East have failed to stir up demand from investors, although some jewellers purchased bullion after prices dropped below $1,300 an ounce.

Cash gold added 0.22 percent to $1,279.11 an ounce by 0328 GMT, still not far above a two-month low of $1,273.06 hit on Aug. 21.

"We are seeing some physical demand but it's not enough to make the market higher. I think the U.S. dollar is a bit too strong. $1,240 to $1,250 should be very good support levels," said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo.

"China bought too much last year, and also this year, gold (price) is a bit higher. I think if we go down lower, we will see some demand."

Spot gold may rebound moderately to a resistance at $1,283 before testing a support at $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.

U.S. gold was steady at $1,280.10 an ounce.

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. [GOL/SPDR]

"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 $1.00 quoted late last week. In Singapore, premiums were steady at 80 cents to $1 an ounce to spot London prices.

(Editing by Tom Hogue)