By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold rose after two days of losses on Wednesday as equities took a hit from weak Chinese factory data, while platinum slid to a fresh 6-1/2-year low as investors feared a drop in demand from the auto industry.
Platinum fell to $925.30 an ounce, its lowest since January 2009, before recouping losses to trade up 0.3 percent at $936.55 by 0722 GMT.
The metal has been hurt by news of Volkswagen AG's falsification of U.S. vehicle emission tests as investors believed it could affect demand for diesel cars. Platinum is used in diesel catalysts.
"The white metal is still trading within a downward bear channel dating back to mid 2014 and if recent developments in base metals, U.S. dollar and automaker stock turmoil persist there is certainly scope for platinum to test below $900," said MKS Group trader Alex Thorndike.
If regulators uncover widespread violations across the industry and environmentally conscious drivers in Europe switch to gasoline, it could "reshape the picture" for platinum, said Erica Rannestad, senior analyst, precious metals demand at GFMS.
The recent sell-off in platinum has added to a malaise that has weighed on prices for the past year amid concerns about weakening demand from top consumer China and surplus inventory as investors have exited exchange-traded funds.
Gold rose 0.2 percent to $1,126.70 an ounce, after losing 1.3 percent over the past two days.
Bullion had come under pressure earlier in the session as the dollar jumped to its highest in nearly three weeks before giving back some gains on expectations the Federal Reserve would hike U.S. interest rates this year.
But a sell-off in equities due to concerns over the Chinese economy provided support for gold towards the end of the Asian session, traders said.
Asian stocks looked set for their biggest single-day fall in a month on Wednesday after a private survey showed activity in China's factory sector unexpectedly shrank to a 6-1/2-year low in September.
Gold's outlook, however, continues to be clouded by a looming U.S. interest rate hike. The Fed stood pat on interest rates last week but the U.S. central bank has also said it would move to increase rates later this year.
Higher rates would dent demand for non-interest-paying gold, while boosting the dollar. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.
Inflows into SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, supported prices on Wednesday. The fund's holdings rose 0.18 percent to 675.80 tonnes on Tuesday, the first inflow in almost a month.
(Reporting by A. Ananthalakshmi; Editing by Himani Sarkar and Biju Dwarakanath)
