By Frank Tang and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold rose around 2 percent on Tuesday as the dollar fell and the previous session's two-percent slide triggered physical buying interest among Asian investors, though prices remain under pressure from all-time highs in the U.S. equity markets.
Physical buying gathered pace in Europe and China on Tuesday, traders said, supporting prices after dollar strength had knocked them lower.
In addition, sales of gold and silver investment coins and bars have also surged after bullion slid to a 4-1/2-year low at $1,131.85 an ounce last week. The yellow metal is currently down about 3 percent this year.
"Retail demand is very strong since prices came off," Heraeus trader Alexander Zumpfe said. "Overall, physical demand is lending some support - Asia is also showing steady buying interest."
Spot gold was up 1.7 percent at $1,169.95 an ounce by 2:41 p.m. EST (1941 GMT).
U.S. COMEX gold futures for December delivery settled up $3.20 an ounce at $1,163, with trading volume about 20 percent above its 30-day average, preliminary Reuters data shows.
A 0.4 percent drop in the dollar index helped underpin gold. The greenback retreated after rallying to a 7-year peak earlier.
Analysts said gold's safe-haven appeal could decline after the Dow and S&P 500 on Monday extended their streak of record closes to a fourth day.
U.S. stocks hit an intraday record high at the open on Tuesday. They later eased 0.1 percent. [.N]
Meanwhile, gold could fall towards $800-$900 an ounce, a level not seen since the 2008/2009 financial crisis, as it is no longer regarded as a decent portfolio diversifier, hedge fund Red Kite said on Monday.
Holdings of the largest gold-backed exchange-traded fund, SPDR Gold Trust, on Monday fell 1.8 tonnes to a six-year low. The fund has seen outflows of 15.8 tonnes so far this month.
In spot market news, The London Bullion Market Association (LBMA) will stop producing its gold lending rates data from Jan. 30 as banks shy away from the risks of providing financial benchmarks, a source close to the situation said.
Among other metals, silver climbed 1.6 percent to $15.82 an ounce. Platinum was up 1 percent at $1,203.75 an ounce, while palladium gained 1.5 percent to $769.72 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Michael Urquhart, David Evans, Marguerita Choy and Diane Craft)
