Gold slips after 3 week gain as Fed meeting eyed

HONG KONG (July 30)   Gold edged lower after three weeks of gains as investors awaited the results of a key Federal Reserve policy meeting this week for guidance on when the US central bank would begin to scale back its stimulus.

Investors were also digesting the launch of China's first gold backed exchange traded funds which opened to lacklustre performance on the Shanghai Stock Exchange.

Spot gold fell 0.7% to USD 1,323.96 an ounce by 0703 GMT after gaining 9% over the last three weeks. US gold climbed about USD 2 to USD 1,323.90.

One Hong Kong based trader said that "Gold is falling because of a lack of buying in Asia today. Everyone is waiting for the FOMC meeting and nonfarm payroll data this week before placing bets."

The Fed's Federal Open Market Committee (FOMC) begins a two day meeting on Tuesday that could provide more clarity on when the US central bank might slow its USD 85 billion monthly bond purchases.

Bullion has lost a fifth of its value this year as signs of an economic recovery in the United States sparked fears of an end to easy central bank money. Comments from Chairman Mr Ben Bernanke have reassured investors, pushing gold up for three straight weeks, but investors want more guidance on the exact timing of any scaleback.

Analysts and traders are keenly watching every piece of economic data, from housing to labour market conditions to help gauge where the Fed is heading.

Barclays analysts said that prices are unlikely to maintain their upward momentum in the seasonally weak period for demand unless US macro data deteriorate, driving further short covering led support.

Buying from China the world's second biggest gold consumer after India was sluggish. Shanghai gold futures were down 0.4% on Monday. Indian demand remains weak following government measures to curb gold imports and reduce its trade deficit.