Gold falls as nervous investors monitor China, Fed policy

Gold slipped on Wednesday, tracking losses in other markets as concerns remained about China's economic slowdown even after it eased monetary policy.

Global stocks have lost more than USD 5 trillion since China unexpectedly devalued its currency on Aug. 11, but a short-lived recovery on Tuesday, following the cut in interest rates and bank reserve requirements, had pushed gold down 1.2 percent.

Spot gold fell 0.6 percent to USD 1,133.56 an ounce by 1003 GMT, on track for a third day of losses. The metal's fall on Tuesday was its steepest since July 20.

US gold for December delivery dropped 0.4 percent to USD 1,133.50 an ounce.

"Nothing looks particularly attractive at the moment, the volatility in equity markets, the very low level of bond yields," Capital Economics chief global economist Julian Jessop said.

"Currencies on the other hand seem to be more driven by perceptions of what the Fed might do on interests, while there haven't really been major and obvious big moves in safe havens."

The dollar cut earlier gains against a basket of leading currencies, while European stocks fell as worries lingered on whether China's actions would be enough to stabilise its cooling economy or halt a collapse in its stock markets.

"Drip-feed of stimulus might not be sufficient to arrest aggressive bears, or significantly lift the economy in a demand-constrained world," Mizuho Bank said in a note on China's policy action.

That could put the focus back on a potential US interest rate increase this year, dampening gold's appeal.

"The key factor that underpins the bearish view for gold is very much the Fed rate hike expectation and that possibility is not off the table," said Barnabas Gan, analyst at OCBC Bank in Singapore.

US data on Tuesday showed consumer confidence hit a seven-month high in August, while new single-family home sales rebounded in July, suggesting underlying strength in the economy that could still allow the Federal Reserve to hike rates this year.

OCBC's Gan said gold, which touched a near seven-week high of USD 1,168.40 last week, could only rally towards USD 1,200 "if there is confirmation that a US rate hike will not happen this year".

Palladium fell 0.6 percent to USD 532.75 an ounce after tumbling more than 6 percent overnight, its steepest fall since April 2013. The metal, mainly used in emissions control systems for cars, trucks and other vehicles, hit a five-year trough of USD 528.50 on Tuesday and has lost around 9 percent so far this week.

Platinum rose 0.6 percent to USD 981 an ounce and silver dipped 0.9 percent to USD 14.56.