* U.S. dollar rises 0.5 percent vs basket of currencies
* Fears that Fed may halt bond-buying scheme dent gold's
* Spot silver off 3 percent
(Updates prices, adds comments)
By Clara Denina
LONDON, May 21 Gold, down in seven of its last
eight sessions extended earlier losses on Tuesday on a firm
dollar, weak technical signals and speculation that the U.S.
Federal Reserve might rein in its stimulus programme.
Gold has been hit by a shift in investment into
higher-yielding equities since the start of the year on signs of
an improving global economic outlook, particularly in the United
Spot gold fell as much as 2 percent to a session low
of $1,364.90 an ounce and was trading down 1.9 percent at
$1,366.96 at 1348 GMT, having been unable to sustain initial
gains around the $1,400 level.
It touched its weakest since April 16 at $1,338.95 on
Monday, before gaining 2.6 percent in U.S. trade and snapping a
seven-session slide that was its longest losing streak since
U.S. gold futures for June delivery fell 1.5 percent
to $1,363.10 an ounce.
"Gold and silver fell in this big black hole yesterday
...and although we saw some buying interest overnight,
fundamentals haven't changed," Saxo Bank senior manager Ole
"The dollar is strong, the U.S. stock markets are holding up
and bond yields are climbing, so the market is trading in
defensive mode ahead of the Federal Reserve's testimony."
The dollar extended gains against a basket of major
currencies, up around 0.5 percent, while U.S. equities
opened higher on uncertainty over the message that Fed Chairman
Ben Bernanke will deliver when he speaks to the U.S. Congress on
The market will also focus on the FOMC minutes from the
central bank's April meeting.
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 the central bank became confident
about its jobs outlook.
Tighter monetary policies in the United States would weigh
on gold as they should strengthen the dollar, making the metal
more expensive for holders of other currencies.
Holdings in SPDR Gold Trust, the largest gold-backed
exchange-traded fund, continued to shrink to 1,031.50 tonnes on
Monday, their lowest 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 generally weak fundamentals
for the metal.
Spot silver was down 3.1 percent at $22.17 an ounce,
but still $1.30 higher than the previous session's lows, having
staged a short-lived recovery in U.S. trade.
Holdings of the largest silver ETF, the iShares Silver Trust
, fell to their lowest 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 extended declines, falling 2.5 percent
to $1,448.50 an ounce and palladium dropped 1.1 percent
to $739 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore;
editing by Jason Neely and William Hardy)