By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold fell for a second session out of three on Thursday on higher equities and as the world's biggest gold-backed fund saw its sharpest outflow in nearly four months.
Bullion fell nearly 2 percent on Tuesday to its lowest in 1-1/2 weeks on technical selling and fears over slowing demand in top consumer China, but steadied just above the $1,300 an ounce in the previous session.
By 0710 GMT, spot gold had slipped 0.3 percent to $1,298.56 an ounce. Silver was also lower by 0.2 percent.
"While we do not have a strong directional view on gold in the near term, the path of least resistance is down and the technical picture suggests further losses in the offing," ANZ analysts said in a note.
"Safe-haven demand for gold will likely become a feature again in the near term (on Ukraine). But the market remains fickle, and profits are likely to be taken off the table quickly."
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Rising stock prices could also take a toll on gold, which is often seen as an alternative investment asset. Asian share markets eked out gains on Thursday as dovish comments from the head of the U.S. Federal Reserve lifted Wall Street for a third straight session.
More importantly, the sharp dip in holdings of gold-backed exchange-traded funds - which tend to reflect investor sentiment - could weigh on prices.
Holdings in SPDR Gold Trust fell 8.39 tonnes to 798.43 tonnes on Wednesday - the biggest outflow since Dec. 23, reversing gains of the previous two sessions.
Physical buyers are also reluctant to purchase jewellery, bars and coins at current price levels as they see further downside to the metal, traders said.
China has been leading the drop-off in physical demand in Asia. Shanghai prices have been at a discount to spot prices for more than a month on soft demand and weaker yuan, denting the incentive for banks to import.
Any escalation in tensions between Russia and the West over Ukraine could offer some upside.
Separatists flew the Russian flag on armoured vehicles taken from the Ukrainian army, humiliating a Kiev government operation to recapture eastern towns controlled by pro-Moscow partisans.
Foreign ministers from East and West will try to defuse the Ukraine crisis on Thursday in Geneva.
(Reporting by A. Ananthalakshmi; Editing by Michael Perry and Anupama Dwivedi)