Gold adds to gains above $1,200

SINGAPORE, Dec 9 (Reuters) - Gold rose for a second straight session on Tuesday, reversing earlier losses to trade above $1,200 an ounce, as the U.S. dollar gave up early gains.
The greenback fell against a basket of major currencies  after earlier gains triggered by a Wall Street Journal report that Federal Reserve officials were seriously considering dropping an assurance that short-term interest rates would stay near zero for a "considerable time".
The step might be taken at the Fed's policy meeting next week, the report said.
Further gains in bullion would depend on the dollar and the timing of the Fed's move to raise rates. Higher rates would decrease demand for non-interest-bearing bullion.
Spot gold rose 0.3 per cent to $1,206.10 an ounce by 0809 GMT. It jumped 1 per cent on Monday on technical buying after the dollar eased from a more than five-year high.
US gold futures jumped 1 per cent.
"Gold will have a hard time holding on to rallies because the gains are mostly from short-covering," said a trader in Sydney.
"The fundamentals regarding a strong economy haven't changed and people are still very much bearish on gold because it looks like a rate hike will come soon."
That was reflected in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, seen as a proxy for investor sentiment.
The fund's holdings resumed declines after a brief uptick and were close to six-year lows on Monday.
The major factor hurting sentiment is the strength in the dollar, which can be boosted by robust economic data and the possibility of higher rates.
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies and also decreases its attraction as an alternative investment.
Softer oil prices have also hurt gold's appeal as a hedge against oil-led inflation. Benchmark Brent crude slipped to its lowest in five years on Tuesday.