Gold hovers above 1-month low; US data weighs

Gold inched up on Tuesday, off a one-month low hit in the previous session, but upbeat US retail sales data appeared to undermine the necessity for stimulus measures and dented gold's appeal as a hedge against monetary easing.

Gold's momentum waned after attempts to break above $1,800 an ounce failed, just as concerns grew on how long-lasting the latest round of stimulus could be, given a recent string of promising data showing signs of a pick-up in economic growth.

"The support from QE3 (third round of quantitative easing) is fading," said Li Ning, an analyst at Shanghai CIFCO Futures. "And if the economy keeps improving, investors will wonder about the length and scale of QE3."

The Federal Reserve said last month that it would buy $40 billion of mortgage-backed securities each month as long as it is needed to help improve the labour market, which encouraged gold buys and sent bullion to just a few dollars below $1,800.

Spot gold inched up 0.2 percent to USD 1,738.80 an ounce by 0636 GMT, after falling to a one-month low of USD 1,728.75 in the previous session. It dropped 1 percent on Monday, its biggest one-day decline in three months.

US gold was up 0.2 percent at USD 1,740.40.

Technical analysis showed that spot gold could fall to USD 1,717 an ounce during the day, said Reuters market analyst Wang Tao.

The uncertainty over when Spain will ask for financial aid also weighed on market sentiment, as investors anxiously await clarity on the next step in the euro zone's efforts in solving its debt crisis, now in its third year.

PHYSICAL BUYING PICKS UP CAUTIOUSLY

Physical buying interest picked up after prices dropped to below USD 1,730 for the first time in a month, but volumes were limited, dealers said.

"We started seeing moderate buying at USD 1,740 an ounce, but buyers are cautious because technically gold may fall further to USD 1,720," said a Singapore-based dealer.

Premiums in Singapore jumped to 80 cents an ounce above London prices from as low as 20 cents last week, as supply was dominated by high-premium gold bars of Swiss brands including Valcambi, Metalor and Heraeus, she added.

"The premium is higher now not because everyone is rushing in to buy gold."

Along with gold, other precious metals all fell to multiweek lows. Spot silver gained half a percent to USD 32.85, rebounding from to a one-month low of USD 32.53 on Monday.

Spot platinum inched up 0.2 percent to USD 1,639.25, after falling to a 2-1/2-week low of USD 1,615.75 in the previous session. Spot palladium rose 0.6 percent to USD 633.46, rebounding from a two-week low at USD 624.20.