Gold near five-week low, stimulus outlook in focus

Bullion has lost more than 20 percent of its value this year as a recovering U.S. economy has dented its safe-haven appeal and raised fears the U.S. central bank would scale back its commodities-friendly bond purchases.

The Fed, which kicks off a two-day policy meeting on Tuesday, is widely expected to announce it will begin curbing its $85 billion monthly bond purchases by $10 billion - a smaller reduction than previously anticipated.

"From the current economic situation in the United States, we expect only a mild tapering, not any big action," said Helen Lau, an analyst at UOB-Kay Hian in Hong Kong. "So there would still be support for gold prices."

Lau said if the Fed does not begin tapering its stimulus this year, gold prices could be between $1,400 and $1,500 by the end of the year.

Spot gold had risen 0.03 percent to $1,313.76 an ounce by 0328 GMT, after falling 1 percent in the previous session to a five-week low of $1,303.85.

"The technical signals are neutral now, with strong support at $1,307," Phillip Futures analysts wrote in a note.

"We are inclined to believe that the support level will not hold and prices are likely to head straight for $1,227.20 should there be large movement that breaks out of the current consolidative range," the Phillip analysts said.

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