BENGALURU- Gold prices steadied near 18-month lows on Tuesday, attempting a break back above the key $1,200 level as the dollar eased and analysts said the precious metal could have fallen too far.
Spot gold was up 0.3 percent to $1,196.10 an ounce at 1300 GMT. In the previous session, the metal hit $1,191.35, its lowest since Jan. 30, 2017.
The dollar, in which commodities such as gold are priced, edged lower against a basket of its peers as the Turkish lira regained its footing, easing concerns of a negative ripple effect on global markets.
"A lot of investors got very disappointed because they thought that gold would be the safe haven in trade conflict and also with Turkey and emerging markets and it wasn't," said Georgette Boelle, commodity strategist at ABN AMRO.
"It's still very difficult to point out where the low is going to be but we are in cheap territory and gold should start bottoming out at these levels."
Gold, which is down about 8 percent this year, has faced a slate of headwinds in 2018 including rising U.S. interest rates, a soaring dollar and failure to capitalise on its traditional role as a hedge against risk amid global uncertainty.
Instead, investors have opted for U.S. Treasuries, seen as the ultimate safe haven, which meant they had to buy dollars.
The bearish stance on gold continued to reflect in record short positions and in the outflow of gold exchange traded products.
Holdings of SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, fell 0.19 percent to 784.60 tonnes on Monday from Friday. Holdings have fallen about 10 percent from their peak in April and are at their lowest since February 2016.
Some investors have the high level of shorts and low positioning in ETFs as an indication that gold is due for a turnaround as it is oversold.
"Gold is a proven inflation hedge and a safe-haven asset in the case of shocks to economic growth, and we believe that current weakness presents an opportunity to benefit from the recovery of this undervalued sector," said David Baker, fund manager and managing partner at Baker Steel Capital Managers.
In technicals, next support for gold is at $1,180, a low hit in January 2017, said ActivTrades chief analyst Carlo Alberto De Casa, adding that the lack of a rebound suggested the main trend remained bearish.
Spot platinum rose 0.3 percent to $800.50, after dropping 3.6 percent to a three-week low at $791.50 on Monday.
Silver rose from an over 13-month low of $14.94 in the previous session. On Tuesday it was up 0.6 percent at $15.
Palladium rose 0.2 percent to $892.20.
(Additional reporting by Apeksha Nair and Sumita Layek in Bengaluru; editing by David Evans) ((firstname.lastname@example.org; +44 207 542 5937; Reuters Messaging: email@example.com))