By Lewa Pardomuan
SINGAPORE (Reuters) - Gold jumped around 1 percent higher on Tuesday after a break above $1,280 an ounce triggered chart-based buying, but gains could be capped by a firmer U.S. dollar and rallies in equities.
Tensions between Russia and Ukraine as well as violence in the Middle East have so far failed to stir up strong demand from investors, although some jewellers started buying bullion after prices dropped below $1,300.
Cash gold hit a session high at $1,290.80 an ounce and stood at $1,289.30 by 0721 GMT, up $12.96. Prices hit a two-month low of $1,273.06 on Aug. 21 on speculation of an eventual increase in U.S. interest rates.
"We've been on a downtrend for so many days, so what we see today is technical buying at $1,282 and $1,283," said a dealer in Hong Kong. "The physical market is a bit quiet after a rush in buying yesterday, and we've got to see if the gain is sustainable or short-lived."
Asian shares held firm while the euro hit one-year lows on Tuesday as investors increasingly expect the European Central Bank to expand liquidity as soon as next week to boost the sagging euro zone economy. [MKTS/GLOB]
A firm U.S. dollar makes bullion more expensive for holders of other currencies and could keep prices below the recent highs above $1,300 an ounce, said dealers.
"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.
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 rose $11.60 an ounce to $1,290.50.
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.
"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 and)
