Gold edges up on dollar

Gold prices edged higher on Wednesday after dropping nearly 1 percent in the previous session, as a slightly weaker dollar came to the aid of buyers, while sluggish physical demand and an improving US economic outlook capped gains. The latest US housing market data added to a string of numbers indicating steady recovery in the world\'s largest economy, diminishing hopes of further quantitative easing which had helped buoy gold earlier this year. The dollar edged down 0.3 percent against a basket of currencies. A cheaper greenback makes dollar-priced commodities, including gold, more attractive to buyers holding other currencies. Spot gold edged up 0.3 percent to US$1,655.14 an ounce by 0241 GMT. U.S. gold gained half a percent to US$1,655.40. Some investors have taken money out of gold after a recent equities rally, and turned to chase higher-yielding assets with indications of a stabilising global economy taking the shine off safe-haven assets such as gold and government bonds. \"Gold has seen some liquidation by funds after the hopes for QE3 (third round of quantitative easing) were dashed,\" said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong. Gold found good support at the US$1,640 level in the previous session, but in the short-term prices could test US$1,620-US$1,630 level due to a generally stronger dollar and lack of support from the physical market, Fung added. The dollar index is up about 0.8 percent so far this month. Technical analysis suggested that spot gold would remain neutral in the range of US$1,634 and US$1,671, Reuters market analyst Wang Tao said. Dealers in Singapore also reported slow physical market activity after prices rebounded above US$1,650 an ounce. \"Buying is over and now clients are just waiting to take physical deliveries,\" said a Singapore-based trader, noting that Indonesia and Thailand were among the most active buyers. Investors are closely watching the US debt market, an indicator of appetite for the safe-haven asset. On Tuesday, US Treasury debt prices posted modest gains, though selling still pushed some yields to multi-month highs as traders focused on the idea that a stronger economy could mean quicker inflation and monetary policy tightening sooner than expected. High oil prices have helped underpin gold sentiment. But oil tumbled in the previous session after comments from Saudi Arabia on its willingness to meet any supply gap. SPDR Gold Trust, the world\'s largest gold-backed exchange-traded fund, said its holdings had slipped 0.23 percent to 1,290.247 tonnes by March 20, the first drop after staying unchanged for four straight sessions. Spot silver rebounded from a 2.3-percent slide in the previous session and was trading up 0.5 percent to US$32.26.