Gold bounced back on Tuesday as buying emerged after the metal held above a key level of $600 an ounce despite a heavy sell-off the previous day, but a firm US dollar was likely to pare gains.
Spot gold rose to $618.00/619.00 ounce from $612.10/612.85 an ounce late in New York on Monday, when it fell to its lowest level in nearly four weeks to $601.60 an ounce.
"It's trying to go back up to $620 right now. If you do cross $620 to $625, I think you will see more people coming into the market," said a dealer in Singapore.
"The fact we touched the bottom and didn't go below $600 is a very good sign. If we do cross $623, maybe the bears will get caught short and then start to chase the market up again," he said. Some dealers pegged the downside target around $570 an ounce. Key resistance was seen around $636 an ounce.
The benchmark June gold future on the Tokyo Commodity Exchange added 28 yen per gram to 2,345 yen ($20.08), tracking gains in New York's COMEX market.
The dollar rose as traders awaited US economic data that could provide the Federal Reserve with a reason to raise interest rates for the 18th time in two years to 5.5 percent at its policy meeting in August.
Traders focus on housing data for clues about the extent of a slowdown in the housing sector. Weakening housing demand could signal easing economic growth and slower inflation.
The euro slipped to $1.2620 from around $1.2635. "I still feel there's enough uncertainty in the market to give it support," said Darren Heathcote, head of trading at Investec Australia in Sydney, referring to international tensions.
US Secretary of State Condoleezza Rice holds talks with Israeli Prime Minister Ehud Olmert on Tuesday on the conflict in Lebanon, with little immediate prospect of a cease-fire between Israel and Hizbollah.
"I think we certainly get some buying on dips but we may not be low enough yet to really cause an influx of buyers. Expectation is that at some point we will probably come back towards the mid-$500s," Heathcote said.
Gold has rebounded from a three-month low of $543 an ounce on June 14 but remains well below a 26-year high of $730 hit on May 12. Platinum rose to $1,207/1,212 an ounce from $1,196/1,202 late in New York. Sister metal palladium rose to $310/315 an ounce from $304/310. Silver inched up to $10.90/10.98 an ounce from $10.84/10.94 late in New York.
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