Gold eased in Asia on Monday after see-sawing most of the day as selling on low inflation signals gave way to safe-haven buying on concern over Hungary's debt crisis and a cut to Ireland's sovereign rating.

But by late afternoon, bearish sentiment had again gripped the sector, sending bullion down by more than $2 an ounce.

Longer term, technical analysis suggests gold is poised to ease even further to lows last seen in late May of $1,175 per ounce.

Spot gold at 3:17 a.m. ET was $2.05 down at $1,190.65 an ounce versus Friday's nominal close. Gold ended last week almost 2 percent lower.

Gold found some crisis-based support on news that the IMF and European Union suspended a review of Hungary's funding program at the weekend, which has ignited fresh euro zone jitters, according to bullion dealers.

This means the country will not have access to remaining funds in its $25.1 billion loan package set up in 2008 until the review is concluded.

Gold right now is not so much a store of value for an inflation issue, it's a safe haven for crisis issues, said Resource Capital Research gold analyst Tony Parry.

But take away the crisis mentality, and gold looks precarious, Parry said. On balance, we are cautious on the medium term outlook for gold, and see more chance of it trading below the US$1,200 mark, than above it.

Trading volumes in Asia were reduced by a market holiday in Japan.

Countering sentiment over Hungary's financial outlook are signs of the United States economy heading into deflation based on cautionary Federal Reserve minutes released last week.

If it becomes clear that deflation is a strong possibility, that will be negative for gold, a metals dealer in Sydney said. Federal Reserve Chairman Ben Bernanke testimony before the Senate Banking Committee on Wednesday will be closely watched for reaction in currency and bullion markets, according to dealers.

If Bernanke suggests that the Fed will resume quantitive easing measures the greenback is likely come under more pressure, possibly offering bullion a lift to gold, they said.

But a balanced outlook suggesting the current weakness is likely to be temporary should provide some support for dollar and likewise is seen weighing down bullion prices.

Gold usually moves inversely to the dollar and in line with the euro. When the dollar rises it makes gold for holders of other currencies more expensive and reduces its demand.

The euro fell on Monday after Ireland's sovereign rating was cut by ratings firms Moody's Investors Service to Aa2 with a stable outlook.

U.S. gold futures for August delivery climbed 0.3 percent to $1,191.60 an ounce against Friday's settlement price of $1,188.20.

Later in the week, bullion markets are awaiting the results of stress tests on European banks due out on Friday as an indicator of wider risk levels in euro-zone economies.

(Editing by Ed Lane)

(Reporting by James Regan)

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