* Markets expected to be quiet during Chinese holiday
* Federal Reserve policy meeting on Sep 20-21
* GRAPHIC-2016 asset returns:reut.rs/1WAiOSC
(Updates prices, adds comment)
By Clara Denina
LONDON, Sept 15 Gold slipped to a two-week low
on Thursday as the dollar edged upwards despite a mixed bag of
U.S. economic data ahead of next week's U.S. Federal Reserve
Spot gold fell as much as 1 percent to $1,309.25 an
ounce and was down 0.7 percent at $1,313.43 by 1422 GMT, with
U.S. gold futures down 0.8 percent at $1,316.20.
That came against the backdrop of data that showed a bigger
than expected drop in U.S. retail sales last month and a
separate report showing that the number of Americans filing for
unemployment benefits rose less than expected last week,
muddying the waters on prospects for interest
ETF Securities analyst Martin Arnold said that Fed
reluctance to increase rates provides a supportive environment
for gold, but even a modest hike in December will show the Fed's
commitment and weaken gold prices in the short term.
U.S. interest rate futures indicate that expectations of a
an increase next week remain low, but the dollar could benefit
from anything in the Fed's statement that hints at a hike before
the end of the year.
Gold is highly sensitive to rising interest rates, which
would lift the opportunity cost of holding non-yielding assets.
The dollar, a strengthening of which makes gold more
expensive for holders of other currencies, was up 0.1 percent
against a basket of six major currencies as European and U.S.
"The gold market is on the defensive. It has remained under
pressure despite the clear and marked reduction in market
expectations of a U.S. rate hike this month," HSBC said in a
"The U.S. yield curve traded to its steepest in two months.
The drop in yields should have supported gold more than it did,
as arguably the dip in the dollar should have. This implies
there is more to gold's sluggishness."
Spot gold looks neutral in a range of $1,319-$1,330 per
ounce and an escape could point a direction, Reuters technical
analyst Wang Tao said.
With China's financial markets closed from Thursday through
Sunday for the Mid-Autumn Festival, physical activity in the
world's biggest gold consumer is expected to be quiet.
India's gold imports fell for a seventh straight month in
August to $1.1 billion as sluggish demand and record high
discounts prompted banks and refineries to reduce overseas
purchases of bullion.
Among other precious metals, spot silver rose 0.1
percent to $18.97 an ounce. Platinum was down 0.1 percent
at $1,028.49 and palladium gained 0.3 percent to $655.30.
(Additional reporting by Swati Verma in Bengaluru; Editing by