By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold slipped on Tuesday on worries a strong dollar and volatile oil markets could undermine an overnight rally that lifted the yellow metal sharply away from four-and-a-half-year lows.
Spot gold traded in a $80 range on Monday, first falling to $1,142.91 an ounce after Switzerland voted against a proposal to boost its gold reserves, and then rallying to $1,220.99 as oil prices recovered.
"The market was overtly short but then the move higher also looks overdone," said a precious metals trader in Hong Kong. The dollar outlook continues to be strong and oil prices could fall again, both hurting gold, the trader noted.
"I think gold is going to carry on being volatile for the rest of the year."
Spot gold had dipped 0.5 percent to $1,204.49 an ounce by 0339 GMT, after gaining nearly 4 percent on Monday, its biggest one-day jump since September 2013.
U.S. gold futures fell 1 percent on Tuesday, while silver futures also gave back some gains after sharp moves higher in the previous session. Platinum and palladium were lower as well after choppy trade on Monday.
Bullion has fallen along with oil in recent sessions on expectations that weaker oil prices could mean less inflationary pressures. Gold is seen as a hedge against rising prices.
But crude oil jumped as much as 5 percent on Monday, rebounding from five-year lows with their biggest daily gain since 2012, boosting gold. It fell again on Tuesday.
Gold's outlook will depend in the near term on the dollar and oil direction, according to an HSBC research note.
"The rally may have further to go near term but shorts exiting the market will provide only near term strength. The dollar still appears to be the favoured currency and may provide greater headwinds for gold going forward," HSBC analysts said.
Physical demand from Asian buyers would also have to be strong for the rally to sustain.
In top consumer China, local prices were trading at a premium of less than $1 an ounce on Tuesday, lower than Monday's $1-$2. Prices even slipped to a discount early on Monday, hinting at sluggish demand.
India, the second biggest consumer, eased import curbs last week in a surprise move but trade sources said that overseas purchases may not be quick to emerge to due to adequate stocks in the country.
(Editing by Joseph Radford and Tom Hogue)