By Clara Denina
LONDON (Reuters) - Gold fell on Wednesday as physical buying slowed down for holidays in China and parts of Europe, and as investors waited to see if the U.S. Federal Reserve sticks to its stimulus programme to spur the economy.
The Fed's policy-making committee ends its meeting later in the day and is widely expected to keep the current pace of bond buying at $85 billion a month due to recent weak economic data.
Gold fell 0.5 percent to $1,469.46 an ounce by 0931 GMT.
U.S. gold futures for June delivery were down 0.2 percent to $1,469.50 an ounce.
"The market is holding back a little with China and most European countries closed and nobody is going to take the lead ahead of the FOMC and U.S. employment figures, which will be very critical as they will give us fresh direction," MKS Capital vice president Bernard Sin said.
The dollar eased against a basket of main currencies as investors warily awaited the outcome of the U.S. Federal Reserve's policy meeting, while expectations the European Central Bank will cut interest rates on Thursday capped the euro.
Accommodative policy is generally seen as supportive for gold, because printing of money tends to be inflationary, but traders noted that inflation readings have been lower recently.
"(Gold) seems to pick up steam either as a result of turmoil in the financial markets or on the back of higher inflation readings, neither of which seem to be prevalent at this particular time," INTL FCStone said in a note.
Investors will also closely watch U.S. non-farm payrolls on Friday.
"A slight dovish tilt in the FOMC's tone would be good for gold, as would a disappointing employment number," UBS analyst Joni Teves said in a note.
"But on the employment front, the risk is that non-farm payrolls are expected to have recovered in April (which) would potentially offset the positive impact of a more cautious FOMC," she added.
Gold tumbled to $1,321.35 on April 16, its lowest in more than two years, after a drop below $1,500 sparked a selloff that stunned investors and prompted them to further slash holdings of exchange-traded funds.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.19 percent to 1,078.54 tonnes on Tuesday, the lowest since September 2009.
But gold has recovered more than half of its $225 loss incurred between April 12 and 16, boosted by strong physical demand, especially in top bullion consumers China and India.
PHYSICAL FLOWS SLOW
A rush in buying of gold bars after the recent plunge in prices has led to tight physical supply in Asia, but overall trading was quiet this week, with most markets shut for the Labour Day holiday.
Premiums for gold bars were little changed in Tokyo at up to $1 to the spot London prices, levels last seen in July 2012 before they were revisited two weeks ago, following a surge in physical buying.
Other precious metals edged lower, also undermined by slower-than-expected Chinese manufacturing data for March.
Silver fell 0.9 percent to $24.07 an ounce. Platinum dropped 0.8 percent to $1,491.75 an ounce, having reached a two-week high of $1,522 on Monday. Palladium was down 0.2 percent to $693.97, having hit a two-week high of $700.72 in the previous session.
(Additional reporting by Lewa Pardomuan in Singapore; Editing by)
