Gold slips for third session, Fed policy meeting in focus

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold extended losses to a third session on Wednesday as investors turned jittery ahead of the U.S. Federal Reserve's statement on the outlook for its bond-buying stimulus.

A rebound in stock markets after Turkey raised its key interest rates, calming fears about emerging markets, also hurt safe-haven gold.

The Fed is widely expected to announce a second cut to its bond purchases at the end of its two-day policy meeting on Wednesday, after announcing an initial $10 billion cut in December.

"Lots of people are anticipating a $10 billion cut, so if the Fed doesn't do anything, prices could rally. If they do cut, I don't think gold will fall a lot as there is good support at $1,200," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

However, Leung cautioned that any gains would be difficult to hold with China - the world's largest gold consumer - on holiday for a week from Friday for the Lunar New Year.

Spot gold fell 0.07 percent to $1,255.30 an ounce by 0713 GMT. It has lost about 1 percent so far this week.

The yen, another safe-haven asset, also eased as Asian markets rallied on hopes that Turkey's huge hike in interest rates would end the flight from emerging markets and revive risk appetite generally.

CHINA PREMIUMS FALL FURTHER

Chinese buying has slowed this week as traders and consumers wrap up for the Lunar New Year holiday, which starts on January 31. Chinese markets will be closed until February 6.

Buying had been brisk in recent weeks in anticipation of the new year as gold is believed to bring good fortune and often gifted.

Premiums for 99.99 percent purity gold on the Shanghai Gold Exchange fell to about $5.50 an ounce on Wednesday from $7 in the previous session. They were as high as $20 in early January.

Trading volumes on the exchange on Wednesday were a little over 8 tonnes - the lowest since December 31.

(Reporting by A. Ananthalakshmi; Editing by Eric Meijer and Miral Fahmy)