By Jan Harvey
LONDON (Reuters) - Gold edged up on Wednesday from a 2-1/2-month low hit in the previous session as a softer tone to equities and the dollar helped arrest its slide, though the metal is vulnerable to further losses as investor demand remains slack.
Bullion hit its lowest since mid-February on Tuesday after U.S. housing data beat expectations, boosting confidence in the U.S. economic recovery and lifting stock markets, which hurt gold's appeal as an alternative investment.
Gold found support at its 100-day moving average of $1,277 an ounce, however, and turned higher after mixed euro zone data resulted in a retreat in European shares and the dollar.
Spot gold was up 0.1 percent at $1,283.60 an ounce at 1419 GMT, while U.S. gold futures for June delivery were up $2.90 an ounce at $1,284.00.
Prices could turn lower again if there is more positive economic data from the United States, analysts said.
"There is no key driver this week. I guess we'll have to wait until next week's FOMC for any clear direction as far as news flow goes," Mitsubishi Corp analyst Jonathan Butler said, referring to a meeting of the U.S. central bank's Federal Open Market Committee.
The dollar extended losses against a basket of currencies, falling 0.2 percent, after data showed sales of new U.S. single-family homes tumbled to their lowest in eight months in March.
U.S. data continues to be monitored for clues on the pace of the Federal Reserve's tapering of its stimulus measures put in place during the financial crisis. The prospect of tapering was a key factor in gold's 28 percent drop last year.
"Our base-case scenario for a U.S. dollar-supportive spring bounce in U.S. data remains on track, with April Richmond Fed surprising to the upside ... and the decline in March existing home sales being smaller than expected," BNP Paribas said in a note.
PHYSICAL DEMAND SOFT
Physical demand in Asia, which tends to provide some support at lower price levels, failed to emerge after Tuesday's drop as buyers expect more price declines, dealers said.
Demand has been quiet in top buyer China as a weaker yuan made it more expensive to buy dollar-denominated gold. China's yuan hit a 16-month low against the dollar on Wednesday.
Shanghai prices were at a premium of about $1 an ounce to spot prices on Wednesday, flipping from a discount overnight.
In other Asian countries, premiums were either stable or slightly lower from week-ago levels.
Investment demand also remained weak with the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, seeing sharp outflows in recent days. Last week alone, the fund's outflows totalled 9.3 tonnes, erasing all the gains made in the year. [GOL/ETF]
Among other precious metals, silver was up 0.1 percent at $19.42 an ounce, while spot platinum was up 0.3 percent at $1,396.00 an ounce and spot palladium was up 0.2 percent at $782.00 an ounce.
Talks aimed at ending a three-month strike in South Africa's platinum sector resume on Wednesday after the world's top producers and union AMCU spent Tuesday haggling over an offer tabled last week by the companies.
The strike is already the longest and most costly for South Africa's mines in living memory.
(Additional reporting by Clara Denina; Editing by David Evans and Dale Hudson)
