(Updates prices)
* Spot gold seen testing $1,266 an ounce -technicals
* SPDR Gold holdings rise for third straight session
* Platinum off lowest in 7 mths hit on Monday
By Apeksha Nair
Oct 18 (Reuters) - Gold prices rose for a second day on Tuesday, supported by a weaker U.S. dollar amid uncertainty over when the U.S. Federal Reserve will raise interest rates.
Spot gold XAU= was up 0.5 percent at $1,261.25 an ounce at 0711 GMT.
U.S. gold futures GCcv1 had risen 0.5 percent to $1,262.60 an ounce.
Fed Vice Chairman Stanley Fischer said on Monday that economic stability could be threatened by low interest rates, but it was "not that simple" for the Fed to hike. is riding on the dollar weakness," said Helen Lau, analyst at Argonaut Securities in Hong Kong.
"The U.S will eventually raise interest rates, but investors still feel that central banks across the world will continue to be accommodative," she said.
Holdings of SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund (ETF), rose for a third straight session on Monday. They were up 0.18 percent at 967.21 tonnes. GOL/ETF
"Markets do not think that the U.S. will continuously raise rates ... Maybe that's why they (ETFs) still want to buy gold," Lau said.
Gold is highly-sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
The dollar index .DXY , which measures the greenback against a basket of currencies, was down 0.2 percent at 97.746 after touching seven-month highs Monday. USD/
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.
Asian stocks rose on Tuesday thanks to a rebound in oil prices. MKTS/GLOB
Spot gold XAU= may test resistance at $1,266 per ounce, as suggested by its wave pattern and Fibonacci projection analysis, according to Reuters technical analyst Wang Tao. long as prices stay above the stiff support of $1,240, we expect a recovery in prices. A close above $1,264 could take prices higher to $1,282 to $1,300 followed by $1,312," said Hareesh V, Research Head at Geofin Comtrade Ltd.
Gold is likely to recover to above $1,300 an ounce next year as a pickup in physical demand counters more potential U.S. rate increases, a Reuters poll at an industry event showed. XAG= was up over 1 percent at $17.62 an ounce.
Platinum XPT= rose 0.8 percent to $944.35. It touched a new over 7-month low of $923 on Monday.
Palladium XPD= was up nearly 1 percent at $643.05.