By Lewa Pardomuan and Rujun Shen

SINGAPORE, Feb 18 (Reuters) - Gold rebounded from a

six-month low on Monday as bargain hunters resurfaced and buyers

in China returned to the physical market after the Lunar New

Year holiday, but a firm U.S. dollar was likely to limit the

upside.

Gold has been under pressure from technical selling and

gains in the U.S. currency after the euro slipped from a

15-month high struck in early February on renewed worries about

the health of the euro zone economy.

Gold rose half a percent to $1,616.35 by 0728 GMT

after falling to around $1,598 on Friday, its weakest since

August. Friday's loss marked bullion's biggest one-day drop

since December.

'There is a fair amount of buying because spot prices fell a

lot during the holiday,' said Peter Tse, director at

ScotiaMocatta, adding the buying frenzy would calm down in

coming days.

Spot contract for gold of 9999 purity on the Shanghai Gold

Exchange dropped to 326.40 yuan a gram, its

lowest in nearly seven months, tracking losses in global market

prices over the week-long holiday. Volume exceeded 22 tonnes,

marking a record high.

In Hong Kong, premiums for gold bars rose to as high as

$1.70 an ounce to the spot London prices from $1.50 last week,

reflecting a surge in buying interest from jewellers, said

Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

But he doubted whether the buying interest would last.

'The strong dollar is the major point. Sentiment is not

bullish for the time being, even though we see there's tension

in North Korea,' said Leung, referring to a lack of safe-haven

buying normally associated with geopolitical tensions.

North Korea has told key ally China it is prepared to stage

one or even two more nuclear tests this year in an effort to

force the United States into diplomatic talks with Pyongyang,

said a source with direct knowledge of the message.

The dollar index was headed for a second day of

gains, holding near a one-month high hit late last week. A

stronger greenback makes dollar-priced commodities costlier for

buyers holding other currencies.

Leung saw support for the metal at $1,600, which if breached

could take it down to $1,580.

Hedge funds and some big speculators slashed their bullish

bets on U.S. commodities, taking aim particularly at gold which

has lost some of its lustre this year, data released on Friday

showed.

U.S. gold for April delivery inched up 0.4 percent

to $1,616.40.

A raft of business surveys this week will be studied for

confirmation of hopes that a dire fourth quarter of 2012 marked

the cyclical trough for the world economy.

Major powers plan to offer to ease sanctions barring trade

in gold and other precious metals with Iran in return for

Iranian steps to shut down the nation's newly expanded Fordow

uranium enrichment plant, Western officials said on Friday.

Precious metals prices 0728 GMT

Metal Last Change Pct chg YTD pct chg Volume

Spot Gold 1616.35 7.29 +0.45 -3.47

Spot Silver 30.05 0.30 +1.01 -0.76

Spot Platinum 1686.49 8.99 +0.54 9.87

Spot Palladium 754.72 1.25 +0.17 9.06

COMEX GOLD APR3 1616.40 6.90 +0.43 -3.54 30843

COMEX SILVER MAR3 30.04 0.19 +0.64 -0.63 9475

Euro/Dollar 1.3335

Dollar/Yen 94.05

COMEX gold and silver contracts show the most active months

(Editing by Muralikumar Anantharaman)

((lewa.pardomuan@thomsonreuters.com)(+65 68703834)(Reuters

Messaging: lewa.pardomuan.thomsonreuters.com@reuters.net))

(Multimedia versions of Reuters Top News are now available for: * 3000 Xtra : visit http://topnews.session.rservices.com * BridgeStation : view story .134 * Reuters Plus : from your WebDSS screen For more information on Top News, visit http://topnews.reuters.com)) Reuters Terminal users can see related news and prices by double clicking on the codes in brackets: - All precious metals headlines - Precious metals market reports - Daily fixing headlines - Indian gold reports - European gold prices - London interbank gold forward rates - London silver forwards - Gold lease rates - London Bullion Market Association - New York Comex gold and silver - New York platinum and palladium - Asian gold prices - Australian precious metals prices - Shanghai Gold Exchange prices - Hong Kong gold exchange prices - Indian bullion prices - Japanese producer prices For Related News and other topics, double click on one of these codes: SPEED GUIDES )

COPYRIGHT

Copyright Thomson Reuters 2013. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.