By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold struggled on Wednesday to recover strongly from sharp overnight losses and traded near its lowest level in two-and-a-half months on a stronger dollar and robust U.S. economic data that curbed the metal's safe-haven appeal.
The dollar hovered around 14-month highs against a basket of major currencies, underpinned by stronger-than-expected U.S. data and a resulting rise in Treasury yields. A stronger greenback hurts dollar-denominated gold as it makes the metal more expensive for holders of other currencies.
Spot gold ticked up slightly to $1,268.16 an ounce by 0630 GMT, not far from $1,262.42, its lowest since mid June, hit in the previous session. Gold fell 1.7 percent on Tuesday, its biggest one-day drop since July 14.
"The technical picture for gold is pretty weak right now. That, and the stronger dollar, provide more downside potential for gold," said one precious metals trader based in Singapore.
"Key technical supports are at $1,265 and $1,230. The uncertainty could increase as we head towards the European Central Bank meeting and U.S. jobs data later this week," the trader added.
Markets are awaiting the ECB meeting on Thursday as they seek clarity on the bank's response to a stalled recovery, disappearing inflation and the sluggish pace of reform in the euro zone.
Some investors expect the ECB to unveil fresh stimulus, after French President Francois Hollande and ECB President Mario Draghi agreed on Monday that deflation and weak growth were threatening the European Union's economy.
U.S. data on non-farm payrolls and unemployment rate, due on Friday, were also eyed to gauge the strength of the world's biggest economy and its impact on the Federal Reserve's monetary policy.
Geopolitical tensions in Ukraine and the Middle East failed to support gold as the stronger dollar offset any safe-haven bids.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund and a measure of investor sentiment, said its holdings fell 1.8 tonnes to 793.20 tonnes on Tuesday. [GOL/ETF]
In news from the physical markets, Indian gold imports and premiums are likely to surge during the rest of the year as buying picks up for the wedding and festival season, the head of the country's biggest gold refiner said.
(Editing by Joseph Radford, Muralikumar Anantharaman and Biju Dwarakanath)
