RTRS:PRECIOUS-Gold slips on weak physical demand; Fed meet eyed
* Gold falls below $1,380 on stimulus uncertainty
* Weak physical demand from India, China - traders
* Fed policy meeting begins later on Tuesday
(Updates prices)
By A. Ananthalakshmi
SINGAPORE, June 18 (Reuters) - Gold fell on Tuesday for a
second session as muted physical demand weighed on prices, along
with fears the U.S. Federal Reserve may pare back its $85
billion monthly bond purchases.
Investors are closely watching the Fed's two-day policy
meeting that begins later on Tuesday as a string of healthy U.S.
data has increased speculation the bank could scale back its
bond buys, hurting gold's appeal as a hedge against inflation.
Physical demand is falling off in India and China, the top
two consumers of bullion, from peak levels seen after a steep
sell-off in April.
"There is not much buying interest. The sentiment right now
is low," said a trader in Hong Kong.
Spot gold fell 0.5 percent to $1,378.1 an ounce by
0635 GMT after losing about 0.4 percent on Monday as U.S. stocks
rallied ahead of the Fed meeting.
Shanghai gold futures fell 0.8 percent.
Any signs of a significant slowdown in the Chinese market
would be a big blow to bullion prices as investors expect China
to offset slower buying from India.
Another trader in Hong Kong said premiums there have fallen
to $2 an ounce over London spot prices, from a high of $6 seen
last month. Hong Kong sells mainly to buyers in China.
Demand in India has eased since the government hiked its
import duty on bullion by a third in an effort to reduce its
current account deficit.
FED CONCERNS
Recent strong U.S. housing and labour data has raised the
possibility of the Fed slowing its bond purchases sooner than
expected.
Most economists expect the Fed to scale back the size of its
bond purchases by the end of the year, and a sizeable number
expect reduced buying as early as September, according to a
Reuters poll.
Bullion has fallen more than 17 percent so far this year as
investors have shunned its safe-haven appeal.
Holdings in SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, stood at 1,003.17 tonnes on
Monday -- their lowest in more than four years.
