SINGAPORE: Gold edged lower on Tuesday as a brightened U.S. economic outlook dented its safe-haven appeal, while a buoyant equity market also prompted investors to take money out of bullion. The expectations of further monetary easing worldwide amid a sluggish growth outlook had boosted investment in gold as a hedge against inflation, sending cash gold prices up as much as 14 percent this year to near $1,800 an ounce. But the flight to safety has started to lose its appeal with upbeat U.S. data in recent months increasing investor confidence in the recovery of the world's largest economy. "Investors are looking at other investment options, as they are less concerned about economic growth and more wanting to hop on the equity rally, which clearly works against some of the reasons why people buy gold," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong. The benchmark S&P 500 on Monday rallied to its highest level since May 2008 and 10 percent below the record close of 1,565.15 set in October 2007. The index has risen 12 percent so far this year, outstripping gold's 6-percent gain. Friesen, however, cautioned that the momentum in U.S. recovery could falter, putting the pressure back on the Federal Reserve to keep real interest rates low to support growth. "Rising treasury yields are consistent with the very bullish outlook on U.S. economy, but we don't think that's on the cards yet." U.S. Treasuries prices fell on Monday, with longer-dated debt yields touching 4-1/2 month highs and investors likely to trim their bond holdings further on signs of an improving U.S. economy and some stabilization of Europe's debt troubles. Spot gold lost 0.3 percent to $1,655.35 an ounce by 0608 GMT, snapping three straight sessions of gains. U.S. gold lost 0.7 percent to $1,655.50. Technical analysis suggested that spot gold could break the resistance at $1,671 an ounce during the day, Reuters market analyst Wang Tao said. Traders said the diminished prospect of further monetary easing from the U.S. Federal Reserve as the economic outlook for the country improves led to expectations of an end to a period marked with cheap and easy cash. "The outlook for the money market is that cash will be withdrawn from the market at some point, and the market is pricing in a much tighter cash scenario," a Singapore-based trader said. "The appeal to buy more precious metals to increase their weightings in portfolio is probably going to be tougher with rising interest rates in the longer dates." On the physical market, jewellers in India plan to close shops for two more days, continuing their protest against the duty increase on gold imports announced by the government last Friday. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its gold holdings stayed unchanged at 1,293.268 tonnes for the fifth straight session on Monday, despite the sharp pull-back in prices last week. Spot silver slid 2.8 percent to a low of $32.3 an ounce, after prices rose for three sessions straight but failed to break the resistance level at $33. "Some smelters may be selling today after prices rose last night," said a Shanghai-based trader, adding that smelters had been unwilling to sell in the past week or so after prices dipped to below $32. He said Chinese physical demand was still sluggish and buyers are eyeing a lower price level -- 6,500-6,600 yuan a tonne -- to jump in. Shanghai spot deferred silver contract edged down 4 yuan to 6,744 yuan a tonne.

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