* Dollar pauses after strong gains
* U.S. durable goods orders up record 22.6 percent in July (Updates prices, adds comment)
By Clara Denina
LONDON, Aug 26 (Reuters) - Gold rose on Tuesday after a pause in the dollar rally prompted a break above $1,280 an ounce that triggered chart-based buying, but gains were expected to be limited as optimism grows on the pace of the U.S. economic recovery.
Spot gold hit a session high at $1,290.80 an ounce in early trade as stop orders were triggered on a break of the 200-day moving average just above $1,280. Buy stop orders are automatic orders placed by traders at pre-set levels.
Prices have been rebounding from a two-month low of $1,273.06 which was hit on Aug. 21 on speculation of an eventual increase in U.S. interest rates. They were trading up 0.6 percent at $1,284.10 by 1442 GMT, while U.S. gold futures rose $6.00 an ounce to $1,284.80.
“Overall, it seems that gold is getting back into that range of $1,287 and $1,312 as it is clawing back some of the losses made last week and gaining on the back of technical strength,” Mitsubishi analyst Jonathan Butler said.
“But with the dollar likely to remain strong, given the speculation of possible forward guidance from the Fed, and U.S. equities also higher ... I‘m not seeing a spectacular rally in gold.”
Traders said the metal was likely to remain supported around $1,300 ahead of the expiration of Comex gold options for August later in the day.
The dollar was flat against a basket of major currencies, pausing after strong gains in the previous week.
Gold’s initial gains were, however, capped by strong U.S. data showing consumer confidence rose more than expected in August, climbing to its highest level since October 2007. Separately, orders for long-lasting U.S. manufactured goods posted their biggest gain on record in July.
U.S. stocks edged higher after the data while European shares underperformed gains seen over the past two sessions, which followed comments from the European Central Bank President Mario Draghi that fuelled expectations the central bank will embark on a large-scale asset buying scheme as soon as next week to boost the sagging euro zone economy.
Tensions between Russia and Ukraine as well as violence in the Middle East helped lift prices, as the metal is usually seen as an insurance against financial and political risk.
Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, however, fell 0.4 percent to 797.09 tonnes on Monday from 800.08 tonnes on Friday, reflecting selling based on the previous session’s price losses.
Physical buying from jewellers in Asia, which had moderately re-emerged with the fall in bullion prices in the previous week, dried up on Tuesday.
Premiums for gold bars in Hong Kong rose to 70 cents to $1.10 to the spot London prices, higher than the 50 cents to $1.00 quoted late last week. In Singapore, premiums were steady at 80 cents to $1 an ounce to spot London prices.
Strength in gold pushed silver higher - the metal rose 0.7 percent to $19.47 an ounce. It had hit a two-month low of $19.25 on Thursday.
Spot platinum, which touched its lowest level since May 5 at $1,407.30 last week, was up 0.2 percent at $1,414.50 an ounce, while spot palladium was down 0.4 percent at $884.75 an ounce. (Additional reporting by Lewa Pardomuan in Singapore; Editing by David Evans and Pravin Char)