* 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 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
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
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
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
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.
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)