PRECIOUS-Gold prices edge up, but improved risk appetite caps gains

* SPDR Gold holdings fall for second straight session

* Liquidity light due to Lunar New Year holiday (Adds comment, updates prices)

Feb 5 (Reuters) - Gold inched up on Tuesday in thin trading as investors made purchases after prices touched nearly one-week lows in the previous session, but improved appetite for riskier assets capped bullion’s gains.

Spot gold had risen 0.2 percent to $1,314.10 per ounce by 0651 GMT, having hit its weakest since Jan. 29 at $1,308.20 in the last session.

U.S. gold futures were firm at $1,318.10 an ounce.

Liquidity was low in Asia’s gold markets, with much of the region on holiday for the Lunar New Year.

“There is strong technical support and the Fed is mostly dovish, which should see gold supported around the $1,300-area,” said Jeffrey Halley, senior market analyst, OANDA, adding that a risk-on environment was taking a bit of sheen out of gold.

“The focus would be more on the U.S. earnings season due to the absence of China for the whole week.”

Spot gold rose to its highest since late April at $1,326.30 last week, after the U.S. Federal Reserve kept interest rates steady and said it would be patient on further hikes amid a suddenly cloudy outlook for the U.S. economy due to global growth concerns and the U.S.-China trade dispute.

However, solid U.S. jobs data that came out on Friday allayed concerns of an immediate slowdown in the U.S. economy.

The central bank may need to raise interest rates a bit further if the economy does well, Cleveland Fed President Loretta Mester said on Monday.

“It seems to us that investors will need to get more signals before getting more aggressive in (acquiring long positions in gold), which won’t come until $1,360 or so,” analysts at TD Securities said in a research note.

“Despite the fact that the Fed has gone dovish, they could still hike one more time.”

Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 0.50 percent to 813.29 tonnes on Monday. Holdings have fallen for a second straight session.

“On the downside, support around $1,300 should be strong in the short-term (for gold) and we favour buying dips towards that level,” MKS PAMP Group said in a trading note.

Among other precious metals, palladium was down 0.1 percent at $1,362.73 per ounce.

Silver rose 0.3 percent to $15.90, while platinum was steady at $816.77. (Reporting by Nallur Sethuraman in Bengaluru; Editing by Subhranshu Sahu)