PRECIOUS-Gold trims losses as euro firms ahead of Bernanke testimony
* Euro rises to session high vs dollar * Gold's appeal hurt by fears the Fed will ease stimulus * Spot silver cuts loss to 0.6 percent, platinum to 1.65 pct (Recasts, updates prices, adds comments, adds byline, changes dateline (previous LONDON) By Carole Vaporean and Clara Denina NEW YORK/LONDON, May 21 (Reuters) - Gold trimmed its losses on Tuesday as the euro regained strength against the dollar, but the metal remained lower on weak chart signs and fears the U.S. Federal Reserve will wind down its economic stimulus program. The precious metal, down in seven of the last eight sessions, has been hit since the start of the year as investors shift into higher-yielding equities on signs that economic growth is picking up, especially in the United States. On Monday gold slid to $1,338.95, its weakest level since April 16, before gaining 2.6 percent in U.S. trade and snapping a seven-session slide, its longest losing streak since March 2009. Spot gold fell as much as 2 percent on Tuesday to a session low at $1,359.44 an ounce, but by 1:45 EDT (1745 GMT) it had cut those losses to about 0.50 percent at $1,376.50 per ounce. U.S. gold futures for June delivery fell 1.5 percent to $1,363.10 an ounce. But by the U.S. finish futures were off just 0.50 percent at $1,377.60 per ounce. "The dollar is strong, the U.S. stock markets are holding up, and bond yields are climbing, so the (gold) market is trading in defensive mode ahead of the Federal Reserve's testimony," Saxo Bank senior manager Ole Hansen said. Fed Chairman Ben Bernanke is scheduled to testify in Congress on Wednesday. Investors are waiting for an update on the future of the U.S. central bank's stimulus program. Bernanke testifies at 10 a.m. EDT (1400 GMT). By the New York afternoon on Tuesday, some gold players were rethinking their positions ahead Bernanke's testimony, betting that the more likely scenario is that the Fed will leave its economic stimulus unchanged. "There's a lot of short-covering ahead of that. People are taking positions off, squaring up. It's too much risk for a lot of people, especially with $100 moves in a matter of days," said Phillip Streible, senior commodities broker at PJ O'Brien in Chicago. Speculation that the U.S. central bank will trim its bond purchases, or quantitative easing, sooner than expected has mounted, given signs of an improvement in the U.S. labor market. That talk pushed gold lower early Tuesday. The euro's gains against the dollar also helped pull gold up from its early lows. Giving up its earlier gains, the U.S. dollar fell against the euro after St. Louis Federal Reserve President James Bullard dented expectations the Fed may soon taper off its bond purchases. Bullard, at an event in Frankfurt, said the Fed should continue quantitative easing, adjusting the pace of bond buying according to incoming data. He also said U.S. inflation has recently been below target. On Monday, Federal Reserve official Charles Evans said the central bank could continue its bond buying through the summer, but end it in the autumn if it became confident about the U.S. jobs outlook. Tighter monetary policy in the United States would weigh on gold as it likely would strengthen the dollar, making the precious metal more expensive for holders of other currencies. Aside from weighing Fed policy, many market participants have been eyeing weak signals in gold technical chart to bet that the yellow metal will continue to decline. Some chartists are pointing to eventual lows around $1,100. Holdings in SPDR Gold Trust, the largest gold-backed exchange-traded fund, continued to shrink, to 1,031.50 tonnes on Monday, their lowest level in more than four years. SILVER UNDER PRESSURE Silver remained under pressure, but well off Monday's lows, when it slid nearly 10 percent to a 2-1/2 year trough on heavy fund liquidation in Asian trade and weak fundamentals. Spot silver was down 2.05 percent at $22.45 an ounce but still higher than the previous session's lows. Holdings of the largest silver ETF, the iShares Silver Trust , fell to their lowest level since mid-January at 329.631 million ounces on Monday. "For now, the focus remains on the fading appeal of gold, and as a result, those who have used silver as a way of expressing exposure to the gold price have followed this trend," UBS analyst Joni Teves said in a note. Platinum also pared early declines but was still down 2.20 percent to $1,455 an ounce. Palladium was down 0.44 percent at $749.27 an ounce. Prices at 1:46 p.m. EDT (1746 GMT) LAST/ NET PCT YTD CLOSE CHG CHG CHG US gold 1377.60 -6.50 -0.5% -12.1% US silver 22.442 -0.126 0.0% -19.6% US platinum 1458.40 -26.20 -1.8% 4.2% US palladium 748.10 -2.65 -0.4% 14.0% Gold 1377.40 -15.64 -1.1% -11.9% Silver 22.49 -0.43 -1.9% -18.8% Platinum 1457.24 -30.26 -2.0% 4.6% Palladium 744.47 -2.53 -0.3% 14.1% Gold Fix 1360.75 -18.00 -1.3% -13.6% Silver Fix 22.44 78.00 3.6% -20.4% Platinum Fix 1456.00 12.00 0.8% 5.4% Palladium Fix 741.00 1.00 0.1% 16.5% (Additional reporting by A. Ananthalakshmi in Singapore; editing by Jason Neely, William Hardy and John Wallace)
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