* Spot gold may fall to $1,488/oz -technicals
* SPDR Gold holdings rose 1.8% on Wednesday
* Stocks climb as China revives trade deal optimism (Adds comments, details, updates prices)
By Brijesh Patel
Sept 26 (Reuters) – Gold edged higher on Thursday as investors bought into the market following a sharp fall in the previous session, but bullion’s gains were limited as the dollar remained firm.
Gold prices slipped as much as 2% on Wednesday as political uncertainties in the United States stemming from an impeachment inquiry into President Donald Trump drove investors to the safety of the dollar.
“The primary factor what’s impacting gold right now is a stronger dollar … people still see the dollar as the prime destination of safety, so essentially the dollar has taken some off gold’s safe-haven flows,” said FXTM analyst Lukman Otunuga.
The U.S. currency climbed to a three-week peak and hovered within striking distance of a two-year high of 99.370 hit earlier this month.
Spot gold showed signs of recovery on Thursday, rising 0.2% at $1,507.24 per ounce by 1006 GMT. U.S. gold futures were up 0.2% at $1,514.90.
“Essentially $1,500 level for gold could act as a support which may attract buyers to push it higher, but in the short term if the dollar continues to steal some of gold’s safe-haven inflows we may see further declines,” Otunuga said.
Meanwhile, European shares moved higher after encouraging comments from China on trade.
The Chinese commerce ministry said Beijing is in close communication with Washington and is preparing to make progress at trade talks in October.
Bullion has risen more than 17% so far this year, propelled by trade tensions and an increasingly dovish monetary policy shift by central banks amid fears of slowing growth.
“Geopolitical developments are still supportive to the precious (complex), however it looks as though fast money over-extended the recent rally,” MKS PAMP said in a note.
“The move lower has seen participants take advantage of the lower entry point as the metal still holds the uptrend, while ETFs (exchange-traded funds) continue to see inflows.”
Holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, jumped 1.8% to 924.94 tonnes on Wednesday from Tuesday.
Investors also kept an eye on developments in Democrats’ decision to begin an impeachment inquiry into Trump, as a summary of a telephone call showed the U.S. president had asked Ukraine’s president to investigate a political rival.
On the technical side, spot gold is likely to fall to $1,488 per ounce, as it has broken a support at $1,514, according to Reuters technical analyst Wang Tao.
Elsewhere, silver edged 0.1% higher to $17.91 per ounce and platinum rose 0.7% to $931.26.
Palladium gained 0.9% at $1,656.92 an ounce. (Reporting by Brijesh Patel in Bengaluru; editing by David Evans)