* Gold bounces off lows but chart trend remains weak
* SPDR Gold holdings <XAUEXT-NYS-TT> steady
* Gold set for biggest weekly fall in a month
By Chikako Mogi
TOKYO, July 10 (Reuters) - Gold extended gains into a second
day on Friday on bargain hunting after hiting a two-month low
earlier in the week when economic uncertainty prompted investor
safe-haven buying in the dollar and U.S. Treasuries, and easing
inflation worries hurt gold's appeal as an inflation hedge.
Despite the bounce, however, traders said gold remained in a
near-term technical downtrend and were eyeing whether physical
demand would provide support near this week's low of $904.70 per
ounce.
"If we look at gold's movements on a one-week or a slightly
longer one-two month basis, we are still in a downward movement,
and this trend should hold unless gold moves above the $920-$930
region," said Adrian Koh, an analyst at Phillip Futures in
Singapore, who was looking at gold candlestick charts.
The gold market is still taking its cues from the dollar, but
the inverse relationship appears to be weakening, he said.
"The dollar lost quite a bit of ground yesterday, but gold
was up but by a lesser amount," he said.
Spot gold <XAU=> rose as much as 0.4 percent to $915.10 per
ounce, before trading up 0.3 percent at $913.90 at 0542 GMT,
compared with New York's notional close of $911.45.
Its high on Thursday was $918.30, despite the dollar falling
0.7 percent against a basket of major currencies <.DXY> that day.
The dollar pared the loss to rise 0.4 percent in Asian trade
on Friday.
At current levels, spot gold is set for a drop of about 2
percent on the week, its biggest weekly loss in a month.
U.S. gold futures for August delivery <GCQ9> eased 0.2
percent to $914.40 from $916.20 an ounce on the COMEX division of
the New York Mercantile Exchange.
Bullion fell to a two-month low near $900 on Wednesday,
partly hit, like other commodities, by fears of stricter U.S.
government regulation of markets.
Liquidation of long positions by fund managers had also
accelerated the decline after gold broke below technical support
at $915, traders said.
Traders were eyeing a key support level of $870-$880, where
the market spent some time after hitting the year's low of $864
in mid-April and resuming its rebound towards $1,000.
Investment in gold has remained sluggish, with holdings at
the world's largest gold-backed exchange-traded fund, the SPDR
Gold Trust <GLD>, steady at 1,109.81 tonnes as of July 9.
[]
Precious metals prices at 0607
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 913.90 2.45 +0.27 3.83
Spot Silver 12.86 0.04 +0.31 13.60
Spot Platinum 1108.00 3.00 +0.27 18.88
Spot Palladium 235.00 2.00 +0.86 27.37
TOCOM Gold 2738.00 -7.00 -0.26 6.41 34472
TOCOM Platinum 3322.00 14.00 +0.42 25.26 10710
TOCOM Silver 386.00 0.20 +0.05 20.89 249
TOCOM Palladium 710.00 -6.00 -0.84 29.09 334
Euro/Dollar 1.3955
Dollar/Yen 92.85
(Additional reporting by Risa Maeda; Editing by Joseph Radford)
