PRECIOUS-Gold stays near 2-1/2-month high as risk aversion lends support
* Asia stocks register modest gains
* Spot gold may fall into $1,208-$1,217/oz range -technicals
(Updates prices, adds quotes)
By Vijaykumar Vedala
BENGALURU, Oct 16 (Reuters) - Gold prices held steady onTuesday near last session's 2-1/2-month high as risk-averseinvestors sought refuge in the metal amid rising politicaltensions and economic uncertainty.
Spot gold was little changed at $1,226.71 an ounce at0707 GMT. It touched $1,233.26 on Monday, its highest since July26, as global stocks slid on rising tensions between Westernpowers and Saudi Arabia and concerns over the pace of globaleconomic growth. Asian stocks rose modestly on Tuesday, gaininga firmer footing after a week of heavy losses. U.S. gold futures were flat at $1,230.40 an ounce.
"While the sell-off in stocks rekindled some demand, therewere other key factors in play. With escalating trade tensions,concerns over slowing global growth, geopolitical tensions andU.S. mid-term election jitters in the mix, gold has a chance toshine," said Lukman Otunuga, Research Analyst for FXTM.
"While the risk-off trading environment is poised to sendgold higher in the near term, the medium- to longer-term outlookremains dictated by the dollar and U.S. rate hike expectations."
Gold is used as an alternative investment during times ofpolitical and financial uncertainty.
The stock market is not stabilised yet and gold prices areexpected to go up, said Yuichi Ikemizu, Tokyo branch manager,ICBC Standard Bank.
"If it (gold) breaks the $1,230 level, which has been aresistance for a long time, with short positions being stillquite large, there is a good possibility of buyback of shortpositions which could push prices to $1,250."
Spot gold may fall into a range of $1,208-$1,217 per ounce,as it faces a strong resistance at $1,235, according to Reuterstechnical analyst Wang Tao. Gold, usually seen as a safe store of value during politicaland economic uncertainty, remains down nearly 10 percent fromits April peak after investors preferred the dollar as theU.S.-China trade war unfolded against a background of higherU.S. interest rates.
Meanwhile, China's factory-gate inflation cooled for a thirdstraight month in September amid ebbing domestic demand,pointing to more pressure on the world's second biggest economyas it remains locked in an intensifying trade war with theUnited States. "Short-covering activities have pushed gold prices higher asinvestors unwind bearish positions amidst heightenedgeopolitical uncertainties," said Benjamin Lu, commoditiesanalyst, Phillip Futures.
"Though we remain bearish on the precious metal for thelonger term, a series of short-covers might trigger a sharp pushin gold prices for this week."
Holdings in SPDR Gold Trust , the world's largestgold-backed exchange-traded fund, rose 0.55 percent to 748.76tonnes on Monday. In other metals, platinum was up 0.4 percent at$842.10 per ounce after touching its highest since July 10 at$850.10 on Monday. Palladium was flat at $1,083.40 andsilver was little changed at $14.64.
(Reporting by Vijaykumar Vedala in Bengaluru; Editing byGopakumar Warrier and Subhranshu Sahu)
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