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imageNEW YORK/LONDON: Gold trimmed its losses on Tuesday as the euro regained strength against the dollar, but the metal remained lower on weak chart signs and fears the US Federal Reserve will wind down its economic stimulus program.

The precious metal, down in seven of the last eight sessions, has been hit since the start of the year as investors shift into higher-yielding equities on signs that economic growth is picking up, especially in the United States.

On Monday gold slid to $1,338.95, its weakest level since April 16, before gaining 2.6 percent in US trade and snapping a seven-session slide, its longest losing streak since March 2009.

Spot gold fell as much as 2 percent on Tuesday to a session low at $1,359.44 an ounce, but by 1:45 EDT (1745 GMT) it had cut those losses to about 0.50 percent at $1,376.50 per ounce.

US gold futures for June delivery fell 1.5 percent to $1,363.10 an ounce. But by the US finish futures were off just 0.50 percent at $1,377.60 per ounce.

"The dollar is strong, the US stock markets are holding up, and bond yields are climbing, so the (gold) market is trading in defensive mode ahead of the Federal Reserve's testimony," Saxo Bank senior manager Ole Hansen said.

Fed Chairman Ben Bernanke is scheduled to testify in Congress on Wednesday. Investors are waiting for an update on the future of the US central bank's stimulus program. Bernanke testifies at 10 a.m. EDT (1400 GMT).

By the New York afternoon on Tuesday, some gold players were rethinking their positions ahead Bernanke's testimony, betting that the more likely scenario is that the Fed will leave its economic stimulus unchanged.

"There's a lot of short-covering ahead of that. People are taking positions off, squaring up. It's too much risk for a lot of people, especially with $100 moves in a matter of days," said Phillip Streible, senior commodities broker at PJ O'Brien in Chicago.

Speculation that the US central bank will trim its bond purchases, or quantitative easing, sooner than expected has mounted, given signs of an improvement in the US labor market. That talk pushed gold lower early Tuesday.

The euro's gains against the dollar also helped pull gold up from its early lows.

Giving up its earlier gains, the US dollar fell against the euro after St. Louis Federal Reserve President James Bullard dented expectations the Fed may soon taper off its bond purchases.

Bullard, at an event in Frankfurt, said the Fed should continue quantitative easing, adjusting the pace of bond buying according to incoming data. He also said US inflation has recently been below target.

On Monday, Federal Reserve official Charles Evans said the central bank could continue its bond buying through the summer, but end it in the autumn if it became confident about the US jobs outlook.

Tighter monetary policy in the United States would weigh on gold as it likely would strengthen the dollar, making the precious metal more expensive for holders of other currencies.

Aside from weighing Fed policy, many market participants have been eyeing weak signals in gold technical chart to bet that the yellow metal will continue to decline. Some chartists are pointing to eventual lows around $1,100.

Holdings in SPDR Gold Trust, the largest gold-backed exchange-traded fund, continued to shrink, to 1,031.50 tonnes on Monday, their lowest level in more than four years.

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