Gold stifled by US growth optimism; fund outflows resume

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold fell for a second session on Thursday, hurt by the Federal Reserve's vote of confidence in the U.S. economy and as outflows from the world's biggest bullion fund resumed after a 1-1/2 week pause.

The Fed looked past a dismal reading on first-quarter U.S. growth and gave a mostly upbeat assessment of the economy's prospects as it announced another cut in its massive bond-buying stimulus.

Spot gold fell 0.2 percent to $1,288.20 an ounce by 0632 GMT, after losing 0.4 percent on Wednesday. Trading was thin as several Asian markets, including China, Hong Kong and Singapore, were closed for the Labour Day holiday.

"There seems to be little conviction in the gold market at present, but we maintain the view that prices could retrace further," ANZ analysts said in a note.

"We remain slightly bearish on gold, as Chinese gold demand has weakened and safe-haven buying remains fleeting."

Gold - often seen as a safe-haven asset at times of uncertainty - failed to find support from escalating tensions in Ukraine, where pro-Moscow separatists seized more government offices, in a sign that authorities in Kiev are losing control of the country's eastern industrial heartland bordering Russia.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 4.19 tonnes to 787.95 tonnes on Wednesday - its biggest outflow since April 16. It is also the first change in flows since April 21. [GOL/ETF]

PHYSICAL MARKETS

Top buyer China has seen sluggish interest since the end of January. Consumers and importing banks have been buying less since the Chinese New Year break due to a weaker yuan.

Chinese prices were at a discount to global benchmarks for most of March, but have now recovered to trade about par.

Demand could pick up in second-biggest consumer India which celebrates Akshaya Tritiya on Friday, when it is considered auspicious to buy gold.

U.S. gold coin sales in April recovered from a seven-month low in March as retail buying picked up, while early interest in the newly launched platinum coins slackened after a burst of initial buying in their first month.

(Reporting by A. Ananthalakshmi; Editing by Ed Davies and Richard Pullin)