By Frank Tang and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold rose slightly on Tuesday, bouncing up after a slide of almost 3 percent the previous day and a further decline in early trade to a five-month low that brought bargain hunters into the market as crude oil prices rallied and U.S. dollar weakened.
Traders said bargain hunting and short-covering stopped the slide a session after gold's biggest daily decline in more than two months. They also noted that as prices tumbled on Monday, open interest in U.S. gold futures climbed more than 1 percent, a sign that new short positions were created.
"Despite a small short-covering rally today, gold is susceptible to further pullbacks. Right now a stronger crude market and lower dollar are the only things that keep gold higher," said Frank McGhee, head precious metals dealer at Chicago commodities brokerage Alliance Financial LLC.
Spot gold was up 0.2 percent at $1,222.66 an ounce by 12:14 p.m. EST (1714 GMT). The session low was $1,215.60 an ounce, the lowest since July 8.
U.S. Comex gold futures for February delivery edged up 50 cents to $1,222.40 an ounce, with trading volume on track to finish below its 30-day average, preliminary Reuters data showed.
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Dealers said bullion buying from Asian consumers, the world's biggest market for physical gold, increased after the sharp overnight drop in prices. However, many remained on the sidelines hoping for even lower prices.
Philip Klapwijk, managing director of Hong Kong-based metals consultancy Precious Metals Insights, told the Reuters Global Gold Forum on Tuesday that a build-up in gold inventory among Chinese banks are curtailing demand.
In terms of investment coin demand, data showed sales of both the U.S. American Eagle gold coins and the Perth Mint's November sales of gold bars and coins fell sharply on a year-over-year basis, while the U.S. Mint's American Eagle silver coins fell 27 percent.
Among other precious metals, silver was down 0.3 percent at $19.07 an ounce. Platinum was up 1.3 percent at $1,354.99 an ounce, and palladium edged up 35 cents at $709.10 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Dale Hudson, Jane Baird and David Evans)