* Gold treads water above 1-1/2 week low
* Spot gold may retrace to $1,562.99/oz -technicals
* Coming up: euro zone flash PMI, July; 0758 GMT
(Adds details; updates prices)
By Rujun Shen
SINGAPORE, July 24 (Reuters) - Gold held steady on Tuesday
above the 1-1/2 week low of around $1,560 an ounce hit in the
previous session, although deepening worries about the euro zone
debt crisis kept prices under pressure.
Concerns about Spain's finances were rekindled after a
number of regions in the country sought help from the central
government, while Moody's Investors Service changed its outlook
for Germany, the Netherlands and Luxembourg to negative from
stable.
Gold has mainly followed the fortunes of the euro in recent
months, shifting away from its traditional status as a so-called
safe haven.
The dollar rose to a two-year high, weighing on
dollar-priced commodities as they became more expensive for
buyers holding other currencies.
"In the short term, gold still looks weak as the sovereign
debt problems in Spain and Italy continue to worry investors,"
said Li Ning, an analyst at Shanghai CIFCO Futures.
"The trouble in Europe will help the dollar to further
strengthen, which will put pressure on gold, although the
downside room for the metal is rather limited."
The $1,530 level has provided strong support for bullion
after being tested a few times this year, analyst say.
The inverse correlation between gold and the dollar stood at
-0.718, its strongest level since the beginning of the year. A
reading of -1 suggests a perfect inverse correlation, in which
one asset rises and the other falls.
"But we need external factors, such as a clear signal on
more quantitative easing from the U.S. Federal Reserve, to lift
gold beyond its current range," Li added.
Spot gold was little changed at $1,577.06 an ounce at
0650 GMT. Prices have been moving sideways between roughly
$1,530 and $1,640 since May.
The U.S. gold futures contract for August delivery
traded nearly flat at $1,576.50.
Technical analysis suggested spot gold could fall towards
$1,562.99 an ounce, the low in the previous session, said
Reuters market analyst Wang Tao.
Gold investors paid little attention to data showing China's
manufacturing output in July grew at its fastest pace in nine
months.
Asia's physical gold market failed to shake off its recent
lethargy, with buyers waiting on the sidelines for prices to dip
before jumping in to pick up bargains.
"Since gold is still trapped in a range, no one is
interested in putting in large orders," said a Singapore-based
dealer. "We expect buyers to return if prices drop below
$1,560."
Gold's premium on platinum continued to widen, standing at
about $186 an ounce, its widest since early June, as spot
platinum stayed near a three-week low of $1,382.2 hit in
the previous session.
Precious metals prices 0650 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1577.06 0.27 +0.02 0.85
Spot Silver 27.02 0.02 +0.07 -2.42
Spot Platinum 1393.25 0.65 +0.05 0.02
Spot Palladium 568.39 1.99 +0.35 -12.89
COMEX GOLD AUG2 1576.50 -0.90 -0.06 0.62 14431
COMEX SILVER SEP2 27.00 -0.05 -0.17 -3.30 1977
Euro/Dollar 1.2115
Dollar/Yen 78.24
COMEX gold and silver contracts show the most active months
(Editing by Miral Fahmy)