* Hawkish tone in Fed minutes spooks investors * Physical buying emerges, but is unable to lift prices much higher * Spot gold may drop to $1,538-$1,548/oz - technicals * Coming up: euro zone Markit manufacturing flash PMI; 0858 GMT By Rujun Shen SINGAPORE, Feb 21 (Reuters) - Gold bounced on Thursday from a seven-month intra-day low as physical buyers in Asia picked bargains a day after the market was rattled by concerns the U.S. Federal Reserve could scale back its monetary stimulus. A number of Fed officials think the central bank might have to slow or stop buying bonds before seeing the pickup in hiring the program is designed to deliver, according to minutes of the central bank's policy meeting last month which were released on Wednesday. The Fed's three rounds of quantitative easing have played an essential role in gold's record-breaking rally in recent years, as the metal's inflation-hedge appeal attracted investors worried about currency debasement as a result of rampant cash printing by central banks. But the sentiment started to shift late last year when signs emerged that the U.S. economy started to recover, raising doubts on the necessity of large-scale quantitative easing and cooling sentiment in gold. "The market has seen some good economic data and is drawn to the question when central banks, especially the U.S. central bank, will start the exit strategy, which is clearly not a good thing for gold," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong. Friesen said the recent selloff in gold was premature given that central banks are likely to stay accommodative through 2013, which will give support to gold. "U.S. unemployment will remain very high in 2013 and Europe still has significant economic challenges as well as policy challenges despite the fact that things are getting better. There is going to be slow growth and central banks will have to continue to keep the economies on life support," he added. Spot gold dropped as much as half a percent to $1,554.49, its lowest since July. It had since reversed course to post a rise of 0.2 percent to $1,565.06 by 0618 GMT. It fell 2.6 percent on Wednesday, posting the biggest daily drop in a year. U.S. gold fell as much as 1.5 percent to a more than seven-month low of $1,554.3 earlier in the day, and recovered to $1,565.10. A firmer dollar, though, created pressure. The dollar index jumped to a three-month high on Thursday, weighing on dollar-priced commodities as a stronger greenback makes them more expensive for buyers holding other currencies. Technical analysis suggested spot gold could extend losses to $1,538-$1,548 an ounce during the day, as indicated by its wave pattern, said Wang Tao, Reuters market analyst. The relative strength index (RSI) on spot gold hovered around 20, suggesting the market had been heavily oversold. Tumbling prices attracted buying interest in the physical market, but the buying was barely enough to offset speculative selling. "There is a lot of physical buying in the region but the amount is not big enough," said Brian Lan, Managing Director at GoldSilver Central Pte Ltd in Singapore. "People are more looking into stocks which are giving better returns, compared with gold which doesn't give any." The S&P 500 index has risen about 6 percent so far this year, compared with gold's year-to-date decline of over 6 percent. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, slumped 1.57 percent from the previous session to 1,299.164 tonnes on Feb 20, the lowest in more than five months. Spot silver fell 0.2 percent to $28.48 an ounce, having fallen to a six-month low of $28.26 in the previous session. Spot platinum extended losses to the third straight session, down 1 percent to $1,628.24. Spot palladium fell 1.4 percent to $727.22, after falling more than 3 percent in the previous session -- its sharpest daily decline in nearly four months. Anglo American Platinum (Amplats) said persistent labour unrest was jeopardising investment in South Africa and warned that talks with government and unions may not lead to a reduction in its planned job cuts. Precious metals prices 0618 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1565.06 2.77 +0.18 -6.54 Spot Silver 28.48 -0.05 -0.18 -5.94 Spot Platinum 1628.24 -16.01 -0.97 6.07 Spot Palladium 727.22 -10.28 -1.39 5.09 COMEX GOLD APR3 1565.10 -12.90 -0.82 -6.61 42871 COMEX SILVER MAR3 28.47 -0.15 -0.53 -5.82 10561 Euro/Dollar 1.3252 Dollar/Yen 93.41 COMEX gold and silver contracts show the most active months

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