Gold struggles to recover

SINGAPORE, Sept 3 (Reuters): Gold struggled on Wednesday to

recover strongly from sharp overnight losses and traded near its lowest level in two-and-a-half months on a stronger dollar and robust US economic data that curbed the metal's safe-haven appeal.

The dollar hovered around 14-month highs against a basket of major currencies, underpinned by stronger-than-expected U.S.  data and a resulting rise in Treasury yields. A stronger greenback hurts dollar-denominated gold as it makes the metal more expensive for holders of other currencies.

Spot gold ticked up slightly to $1,268.16 an ounce by 0630 GMT, not far from $1,262.42, its lowest since mid June, hit in the previous session. Gold fell 1.7 percent on Tuesday, its biggest one-day drop since July 14.

"The technical picture for gold is pretty weak right now.  That, and the stronger dollar, provide more downside potential for gold," said one precious metals trader based in Singapore.

"Key technical supports are at $1,265 and $1,230. The uncertainty could increase as we head towards the European Central Bank meeting and U.S. jobs data later this week," the trader added.    

Markets are awaiting the ECB meeting on Thursday as they seek clarity on the bank's response to a stalled recovery, disappearing inflation and the sluggish pace of reform in the euro zone.